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American Insurance Agency

 

Directors & Officers (D&O)

Directors and Officers Liability Insurance (often called D&O) is liability insurance payable to the directors and officers of a company, or to the organization(s) itself, to cover damages or defense costs in the event they suffer such losses as a result of a lawsuit for alleged wrongful acts while acting in their capacity as directors and officers for the organization.

 

D&O insurance insures "behavior" in that the decisions of directors and officers regarding a matter which often lead to covered claims. That is, an incorrect decision often leads to shareholder discontent and, thus, a lawsuit against the directors and officers who made the decision. State law typically protects the directors and officers from liability (particularly exculpatory provisions under state law relating to directors) but this does not mean that actions are not brought by private plaintiffs (aggravated by the loss of money and seeking a quick payout from insurance proceeds). As such, even innocent errors in judgment by executives will bring D&O insurance into the forefront of the matter.

 

Typical sources of claims include shareholders, shareholder-derivative actions, customers, regulators (including those that would bring civil and criminal charges), and competitors (for anti-trust or unfair trade practice allegations.

 

D&O insurance is usually purchased by the company itself, even when it is for the sole benefit of directors and officers. Reasons for doing so are many, but commonly would assist a company in attracting and retaining directors.

 

Intentional illegal acts or any illegal gains/profits obtained by "wrongful acts" as defined under the policy, which may include certain acts, omissions, misstatements while acting as a director/officer of the organization.

 

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Did you know? You can get coverage even if you have experienced losses