D&O/E&O Liability Insurance

In the course of directing and managing a company, directors and officers must make a variety of tough management decisions – hiring and firing of senior executives, deciding how to allocate scarce company resources, and how to respond to dynamic competitive pressures. In the course of these duties, mistakes can be made that expose these directors and officers to personal liability – lawsuits that target them and their personal assets, separate from the company itself.


D&O/E&O Liability Insurance is a type of insurance that a company purchases so that if the directors and officers of the company are sued for something they do in the process of managing the company, they are protected from personal liability. It is often offered as a form of employee benefit, like health insurance or 401K matching, to directors and officers of a company.


It is generally provided so that a company can attract high-quality directors and officers without fear of personal financial loss for innocent mistakes made in the course of managing an organization.


There are three different types, or sides, of D&O/E&O Liability Insurance:

Side A: This kind of policy covers directors and officers directly. If one of the insured individuals are sued, the policy will directly pay for defense costs, settlements, or other incurred costs
.Side B: This kind of policy is more indirect, compensating the company itself if it must reimburse officers and directors for legal costs as part of its indemnification policies (not holding the officers and directors responsible for losses or mistakes)
.Side C: Much more broad, this policy covers the company itself from costs incurred from lawsuits, rather than covering the personal liability of individual directors and officers.


Some companies get only one or two of these different types of coverage, others get all three. An insurance agent can help determine the right type of coverage for a given company’s risk profile.

Share:

Share by: