As a business leader, you bear extensive responsibilities. With these duties come potential liabilities that could put your personal assets at risk.
Directors and Officers (D&O) insurance is a safeguard in the face of such exposures. In this comprehensive guide, we delve deep into the nuances of D&O insurance.
What is D&O insurance?
D&O insurance protects the personal assets of corporate directors and officers, in the event they are personally sued by employees, vendors, competitors, investors, customers, regulators or other parties, for actual or alleged wrongful acts in managing a company.
This type of insurance can cover legal fees, settlements and other costs. D&O insurance is the financial backing for a standard indemnification provision, which holds officers harmless for losses due to their role in the company.
Why do businesses need D&O insurance?
The threat of litigation is a prevalent risk in today’s complex business landscape. From disgruntled shareholders launching class actions over perceived mismanagement, to regulatory bodies scrutinizing your company’s affairs, there exist many circumstances where directors and officers could find themselves personally liable.
Moreover, without D&O insurance, individual directors would likely need to dip into their own pockets to pay for high defense costs – an undesirable scenario for any business leader.
What does D&O insurance cover?
A typical D&O insurance policy provides coverage for:
- Defense costs: Legal costs incurred while defending against lawsuits.
- Settlements & judgements: The amount awarded to the plaintiff if the case goes to trial and judgement is made in their favor, or if a settlement is reached.
- Investigation costs: Costs resulting from formal investigations launched by regulators or criminal prosecutors.
What does D&O insurance not cover?
While D&O insurance provides broad coverage, it does have some limitations. Key exclusions typically include:
- Fraudulent or criminal acts: Coverage ceases when there is a final adjudication proving fraudulent or criminal behavior.
- Personal profiting: If an insured individual gains personal profits to which they were not legally entitled, the policy will exclude these profits from coverage.
With an intricate understanding of D&O Insurance, you can better assess your company’s needs and make an informed decision about the right coverage for your team. Call Iron City Insurance Brokers today to find a D&O insurance plan that fits your business needs and budget. For more information, visit ironcityins.com.