How D&O Insurance Protects Companies and Executives
Directors and officers insurance protects individual board members and officers by preventing them from suffering personal financial losses as the result of legal action. This, in turn, protects the company by allowing business to continue as usual without executives worrying about the possibility of financial loss (or leaving for another company).
If, for example, a director at a publicly traded company makes a business decision that causes shareholders to suffer significant financial losses, he or she may face D&O claims alleging that the decision was made as a result of improper business techniques. With D&O insurance, so long as no illegal activity is discovered, the director will be protected from personal loss.
Coverage Explained: What Counts, What Doesn’t
Business judgment isn’t always perfect—even high-ranking executives can make honest mistakes. As such, coverage depends upon the details of the policy and the case itself. Regardless of any clauses or exclusions, D&O policies do not cover illegal activity or activity that falls outside of the range of a person’s job capacity as a director or officer.
The following are examples of issues that would be covered: