Management liability insurance, also known as directors and officers (D&O) liability insurance, protects directors and officers of an organization if they are personally sued when managing a company or nonprofit organization. D&O covers costs and damages (awards and settlements) that arise from wrongful action allegations and lawsuits brought against members of the board of directors or an officer of an organization. A D&O policy can help reimburse an organization for the legal fees, settlements and other costs of defending directors against a lawsuit. A director or officer can be part of a lawsuit for a company even if they no longer are part of the executive team or no longer work for the organization. If you have a board of directors for your organization, you should discuss D&O insurance with your agent. We would be happy to answer any questions regarding this type of insurance, and shop around for you to make sure we find the best policy for a very competitive price.
Directors & Officers (D&O) Insurance – Frequently Asked Questions
- What is Directors and Officers (D&O) insurance?
D&O insurance protects the personal assets of corporate directors and officers—as well as the organization itself—against claims alleging wrongful acts in their leadership roles. This includes lawsuits from shareholders, employees, regulators, competitors, and more. - What types of organizations need D&O insurance?
Any organization with a governing body—including private companies, nonprofits, and publicly traded businesses—should consider D&O coverage. Even small or family-run businesses can face claims against directors for decisions made on behalf of the company. - What does D&O insurance typically cover?
D&O covers:
- Allegations of mismanagement, breach of fiduciary duty, or negligence
- Regulatory or compliance investigations
- Employment-related claims (when combined with EPLI)
- Shareholder suits
- Defense costs and settlement expenses
- Does D&O insurance protect personal assets?
Yes. If a director or officer is sued personally for actions taken in their official capacity, D&O helps shield their personal finances—unless the claim falls under a policy exclusion (e.g., fraud). - What are Sides A, B, and C in D&O coverage?
- Side A: Covers directors/officers when the company can’t indemnify them
- Side B: Reimburses the company for indemnifying directors/officers
- Side C: Covers the entity itself (often in publicly traded companies, especially for securities claims)
- What are common claims made against directors and officers?
- Misuse of company funds
- Breach of fiduciary duty
- Misrepresentation to investors or clients
- Errors in strategic decision-making
- Failure to comply with laws or regulations
- How is D&O insurance different from general liability or EPLI?
General liability covers bodily injury and property damage. EPLI covers employment-related claims. D&O covers leadership decisions and governance-related actions, particularly involving shareholders, boards, or regulators. - Does D&O insurance cover nonprofit board members?
Yes, and it’s highly recommended. Nonprofits face many of the same risks as for-profits, including mismanagement of funds, conflicts of interest, and employment practices claims. - How are D&O policies structured and priced?
Pricing depends on company size, revenue, ownership type (private, public, or nonprofit), number of board members, prior claims history, and risk exposure. Policies are often customized and may include deductibles or shared limits. - What is excluded from D&O coverage?
Common exclusions include:
- Fraud or criminal acts
- Personal profit or gain not legally entitled
- Bodily injury or property damage
- Prior known claims
- Claims covered under other policies (e.g., EPLI, professional liability)
