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Director and Officer Insurance 101

Director and Officer Insurance 101
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Director and Officer Insurance (D&O) Definition:

Director and officer insurance is a type of liability insurance covering director and officer for claims made against them while serving on a board of directors and/or as an officer. Director and officer insurance can be written to cover the director and officer of publicly traded companies, privately held firms, not-for-profit organizations, and educational institutions. In effect, the policies function as “management errors and omissions liability insurance,” covering claims resulting from managerial decisions that have adverse financial consequences.

Director and Officer Insurance (D&O) policies can contain “shrinking limits” provisions, meaning that defense costs—which are often a substantial part of a claim—reduce the policy’s limits. This approach contrasts with commercial general liability (CGL) policies, in which defense are typically covered in addition to policy limits. However, some director and officer insurance products do provide defence costs in addition to the limit on an unlimited basis or could provide a special sublimit that is “in addition to the policy limit” that is specifically for defence costs.

Other distinctive features of director and officer insurance policies:

  1. Are written on a claims-made basis
  2. Usually contain no explicit duty to defend the insureds (when covering for-profit businesses)
  3. Cover monetary damages but exclude bodily injury (BI) and property damage (PD)
director and officer insurance

See also Claims-made coverage trigger; Duty to defend; Errors and omissions (E&O) insurance; Nonprofit directors and officers liability insurance; Shrinking limits defense provision.

Whether your organization is publicly traded or a small private company director and officer insurance should be considered to help protect the management/leadership team. To learn more speak to an ALIGNED Insurance Broker or connect with us at
ALIGNED Across Canada   100% Canadian owned, ALIGNED is a premiere insurance brokerage that serves more than 1,400 clients across the country. ALIGNED’s offices in Toronto, Calgary and Vancouver are supported by a national operations centre in Cambridge, Ontario. Uniquely within the industry, ALIGNED creates, negotiates and delivers the best business insurance and risk management strategies/solutions to organizations like yours.

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