Director’s and Officers liability insurance, otherwise known as D&O Insurance provides
insurance that protects officers and directors of both nonprofit and for-profit
companies from liability for monetary damages that result from actual or alleged
wrongful acts committed while performing their duties for the company. Director’s
and Officers liability insurance also covers expenses associated with administrative,
civil, criminal and regulatory proceedings relating to actual or alleged errors,
omissions, neglect or breach of duty.
Why is D & O insurance a must have coverage for a small business? It is because
Directors and Officers can be held liable for decisions they make while acting on
behalf of the company. Typically claims will be made by stockholders, clients or
employees who feel they have been damaged financially by the actions of the directors
or officers. D&O insurance allows the executives of the company to transfer liability
for their actions to the insurance company and protects the directors and officers
personally and the company as an entity. If this coverage was not available it would
be very difficult, if not impossible, to hire directors and officers for any corporation.
In addition to D&O coverage these policies also typically cover Employment Practices
Liability and Fiduciary liability. Employment Practices Liability insurance covers
the insured for actual or alleged wrongful termination, wrongful discipline, harassment,
discrimination, or retaliation. Fiduciary liability will cover those individuals
in the company who are responsible for administering employee benefit plans such
as pension plans, ESOP plans or 401K plans.
Business auto insurance policies coverage may vary, but generally most policies
cover medical payments of the insured party, physical damage of the insured vehicle,
property damage to third party, bodily injury to third party and third party fire
and theft. Items such as company advertising logos and decals on the vehicle may
also be covered. Because every small business has different needs, most business
auto insurance policies can be customized. However, commercial auto insurance policies
require that the business owner specify which vehicles are to be covered as well
as potential drivers of the vehicles listed on the policy.
It is important not to confuse D&O liability insurance with general liability, or
errors and omissions liability insurance because they are very different in terms
of the risks they cover. General liability insurance on one hand covers the liability
hazards associated with the premises or operations of the insured while errors and
omissions coverage typically provides coverage for liability arising out of advice
or services performed for a specific client.