Directors & Officers insurance protects corporate directors and officers against claims, often made by stockholders, customers and employees, alleging financial loss arising from mismanagement. The policy provides two protections: the first reimburses the insured organization when it is legally obligated to indemnify directors and officers for their acts; the second provides direct coverage to directors and officers when the organization is not legally obligated to indemnify them. Coverage can extend to defense costs for criminal, regulatory and civil trials. D&O policies typically exclude intentional/dishonest acts, bodily injury and property damage, but do include “wrongful acts” such as unintended omissions and misstatements. The underlying principal is that directors and officers must be allowed to take reasonable strategic risks in the course of business without the threat of personal liability.
Under state law, directors’ and officers’ personal assets are at risk. So, quality D&O coverage is necessary for a company to attract top directors and officers.
