Directors and Officers Liability
Directors and officers (D&O) liability insurance is insurance coverage that protects individuals from personal losses if they are sued as a result of serving as a director or an officer of a business or other type of organization, including non-profits. It can also cover the legal fees and other related costs the organization may incur as a result of such a suit. Most policies exclude fraud and criminal offenses.
Directors and officer’s liability insurance claims are paid to directors and officers of a company or organization for losses or reimbursement of defense costs if legal action is brought against them. Such coverage can also extend to criminal and regulatory investigations or trial defense costs. Civil and criminal actions are often brought against directors and officers simultaneously. D&O insurance has become closely associated with broader management liability insurance, which covers liabilities of the corporation, as well as the personal liabilities for the directors and officers of the corporation.
Policies can be written to insure against a variety of hazards, but they generally exclude fraud, criminal activity, and illegal profits. Also, most policies contain "insured vs. insured" clauses, whereby no claim is paid when current or former directors and officers sue the company. This prevents the company from profiting from deceit or conspiracy.