Directors and Officers (D&O) coverage protects the directors and officers of corporations and other entities against legal judgments and related expenses resulting from allegations of wrongful acts committed in their individual capacity as company directors and officers.

The "individual capacity" is the most important aspect of this coverage. Directors and officers are fiduciaries of corporations, responsible for managing the affairs of these organizations. They must act with due diligence in carrying out their responsibilities and can be held personally liable if their neglect results in a loss to the corporation or its shareholders.

D&O is provided on a claims-made basis. Coverage is typically provided in two parts: direct coverage to the directors and officers and corporate reimbursement. The direct coverage part is only utilized when the corporate entity is not permitted to reimburse the directors and officers.

D&O coverage can become very complicated, and coverage changes depending upon the type of insured entity. For example, volunteers are often covered under D&O policies for non-profit entities, but not usually provided under other policies. Some policies include entity coverage, and some include employment practices (EPL) coverage.

Except for some very specialized policies, D&O coverage does not provide protection to the directors and officers of a professional organization for professional liability claims. This is because the organization should buy a separate professional liability policy.

For D&O coverage, broader policies are not necessarily better. For example, employment practices coverage (EPL) can be purchased for small to medium sized firms for a very low price with deductibles lower than most D&O policies. Rather than allow an EPL claim to erode D&O limits, it is often better to purchase a stand-alone EPL policy and leave the D&O policy to respond only to D&O claims.

Acadia Specialty provides directors and officers and other insurance coverages for a wide range of organizations on a national basis. Give us a call or contact us to discuss your specific situation and specialty lines insurance needs. The result will be sound professional advice, and competitively priced, customized insurance solutions.

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