Clarke & Sampson Blog

Directors' & Officer's Liability Insurance (D&O)

Posted by Matt Stephens

Dec 22, 2015 11:00:11 AM


bigstock-Business-People-63782401-449626-edited.jpgNo matter what size a company is, there is always a chance that it could be targeted with litigation arising from the management decisions of its board members. Learn more about how to protect your company today




D& O Fills the Coverage Gap

Unlike a commercial general liability insurance (CGL) policy that provides coverage for claims arising from property damage and bodily injury, a directors’ and officers’ liability (D&O) policy specifically provides coverage for a “wrongful act,” such as an actual or alleged error, omission, misleading statement, neglect or breach of duty.

A D&O policy provides defense costs and indemnity coverage to the entity listed on the policy, which may include the following:

  • Coverage for individual directors and officers
  • Reimbursement to the business for a contractual obligation to indemnify directors and officers who serve on the board
  • Protection for the organization or entity itself

Indemnification provisions are typically included in the bylaws of the organization. While these are an important risk component, small to midsize privately held companies often do not have the financial resources to fund the indemnity provisions, making the bylaws hollow. A D&O policy can provide an extra blanket of security in the event of a covered loss.



A “fraud” exclusion is typically included in a D&O policy, which eliminates coverage for losses due to dishonest or fraudulent acts or omissions, or willful violations of any statute, rule or law. There are many additional forms of coverage to adequately protect directors and officers, including the following:

  • Entity coverage
  • Payment priority for insured persons
  • Severability of the insured as well as severability of the application
  • Coverage over time—for past, present, and future directors and officers
  • Pay on behalf clause


In addition, some D&O policies can be endorsed to provide employment practices liability (EPL) coverage and/or fiduciary liability protection.

  • While EPL endorsements broaden coverage, they often do not provide a duty to defend clause and are subject to a substantial deductible. Many EPL endorsements do not provide for a separate limit of liability in addition to the limit available under the D&O policy as well. If the D&O limit is reduced or exhausted by payment of an employment practices claim, directors’ and officers’ personal assets may be at risk.
  • Fiduciary liability insurance provides coverage for liabilities arising out of ERISA, where fiduciaries can be held personally liable for losses to a benefit plan incurred as a result of alleged errors, omissions or breach of their fiduciary duties.

Statistics show that shareholders and employees are the most likely group to sue private companies. Other parties may bring suits, such as the corporation itself, competitors, creditors, regulatory bodies, etc.

Protect Your MVPs

When it comes down to protecting your board of directors and or officers you want to protect them to the fullest. Contact Clarke & Sampson today 703-683-6601 to find the best option for you.