Directors and officers insurance provides protection for insured directors and officers as well as the corporate entity itself. The corporation is protected because D&O insurance covers corporate indemnification and expense advances. The directors and officers are protected by the insurance coverage when a corporation is unwilling or unable to indemnify directors and officers.
Besides liability protection for directors, officers, and the corporation, D&O insurance may be useful on many other levels. For example:
- Investors may require such insurance as a condition for funding
- Directors and officers may require such protection before serving
Here are several things that may be covered by D&O Insurance:
- Employment practices liability (i.e., employment related lawsuits)
- Fiduciary liability (i.e., liability resulting from fiduciary duty violations)
- Stockholders’ and clients’ claims against corporation, directors, and officers
D&O insurance coverage is a complex matter and may have various exclusions, such as:
- Conditions already in place when applying for coverage
- Conduct for which indemnification is prohibited by state law
- Fraud and criminal fines
- Punitive damages
However, note that even as to covered conditions, insurance companies may assert a defense when a controversy actually arises.
Issues involving D&O insurance can be highly complex. A qualified business attorney can help you obtain D&O insurance and analyze specific claims that fall within the coverage.