D&O Insurance: Protecting Corporate Leaders from Personal Liability

**Directors and Officers (D&O) Insurance** is a specialized liability policy that protects the personal assets of corporate directors and officers from lawsuits arising from their performance (or non-performance) of duties. It’s essential for any company, especially those with outside board members, investors, or public shareholders.

The Three Parts of D&O Coverage

A D&O policy typically contains three insuring agreements (or “sides”):

1. Side A (Non-Indemnifiable): Covers the individual director or officer when the company cannot legally or financially indemnify them. This is the core personal protection.
2. Side B (Indemnifiable): Reimburses the company for costs incurred when the company does legally indemnify the individual officer or director (pays their legal expenses).
3. Side C (Entity Coverage): Protects the corporate entity itself from securities claims. This is common for publicly traded companies.

Common Sources of D&O Claims

D&O coverage pays for legal defense and settlement costs related to allegations such as:

• Mismanagement of company assets (breach of fiduciary duty).
• Misrepresentation in corporate financial statements.
• Failure to comply with regulations or laws.
• Wrongful termination claims by former employees (often bundled with Employment Practices Liability Insurance).

**D&O** is critical to good corporate governance, ensuring that leaders can make difficult business decisions without the fear of personal financial ruin.