If you’re on a Board of Directors, serve as an Officer or are on the executive team of a company or board of directors, there is a type of insurance you need to know about – Directors and Officers Insurance (known as D&O Insurance.)We usually advise our clients to only agree to serve on a board if they will be covered by the company’s D&O policy, or purchase their own policy.
D&O Insurance provides protection for officers, board members or executives of corporations and not-for-profit organizations. D&O insurance can aid in covering the costs related to defending certain types of lawsuits and can also help protect the organization’s name, reputation and resources.
What Does it Typically Cover?
D&O insurance covers broad areas of liability including claims for financial loss resulting from mismanagement.
- Mismanagement of funds or investments
- Failure to fulfill fiduciary duties
What’s NOT Typically Covered?
- Bodily injury claims
- Intentionally dishonest acts
- Matters covered by other standard policies
- Employment practice liability (this can be added to D&O Liability policies as an Employment Practices Liability Practices Insurance rider – also known as EPLI.)
- Unfair competition practices
- Reporting errors
- Failures to comply with legal or regulatory governances
- Public and private nuisance claims
Why do I need D&O Liability Insurance?
Without D&O liability coverage, the personal assets of the organization’s Board, executive staff and officers may be at risk if liability claims are made against the organization. Just defending a suit can cause profound financial hardship to these individuals.
If you’re going to serve on a Board of Directors or as an executive for a company or non-profit entity, you should ask if they carry D&O insurance and insist on it being added.
Have question about how you can protect your organization’s board and officers? Contact your Zinner accounting professional.