Directors and Officers Liability Insurance (D&O Liability) is purchased by corporations to provide financial protection of corporate board members and corporate officers from being held personally responsible for actions of the corporation. Claims may be made against corporations and their boards and officers by employees, stockholders, and consumers/customers. Corporate board members in particular serve without compensation, and they will be reluctant to do so without the protection of this insurance.
D&O Insurance has several primary purposes and sometimes companies purchase this insurance in sections:
- Employment Practices Insurance, which can include claims against the board and executive for discrimination (age, sex, race, disability, etc.), wrongful termination, sexual harassment, and other employment-related allegations.
- Fiduciary Responsibility Liability Insurance, protecting board members against claims of conflicts of interest, acting against the interest of the company, failing to provide oversight for legal or financial dealings, not protecting the assets of the corporation.
- Public corporations may be sued by stockholders who believe that share prices are too low or who lost money on a sale.
No Protection for Intentional Action D&O Insurance is not designed to protect board members or executives from liability for intentional actions, criminal actions, or actions beyond their scope of duties. Securities fraud, insurance fraud, personal sexual harassment, and other similar kinds of activities are not within the scope of this insurance.
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