Directors and officers (D&O) liability insurance is insurance coverage intended to protect individuals from personal losses if they are sued as a result of serving as a director or an officer of a business or other type of organization. It can also cover the legal fees and other costs the organization may incur as a result of such a suit.
Directors and officers liability insurance is akin to corporate governance, corporate law, and the fiduciary duty owed to stakeholders, such as shareholders and beneficiaries. US federal law grants directors and officers broad discretion in their business activities. Corporate law is typically handled at the state level. Publicly traded companies are subject to more federal regulation than privately held companies, particularly due to the Securities Act of 1933 and the Securities Exchange Act of 1934.
KEY TAKEAWAYS
- Directors and officers (D&O) liability insurance covers directors and officers and/or their company or organization if sued.
- D & O insurance claims are paid to cover losses associated with the lawsuit, including legal defense fees.
- Most policies exclude fraud and criminal offenses.
