Directors and Officers Coverage (D&O coverage) is a type of insurance that protects management of a business or corporation and the corporation itself from claims arising from wrongful or negligent acts committed by the Directors or Officers during the course of their duties.
Traditional D&O coverage has been used for sometime by larger companies and corporations to insure their officers and directors against financial liability claims. Individuals often covered include CEOs, CFOs, elected board directors, and other elected officials of the company. More recently, small business owners have been adding D&O insurance to protect their business against these negligent or wrongful acts committed by their Directors and Officers that could negatively affect their business and its financial well-being.
Just a few of the protections Directors and Officers Coverage provides against are:
- Competitor suits involving unfair trade
- Antitrust or intellectual property infringement
- Defends and provides coverage in connection with regulatory actions brought by the federal Trade Commission, Federal Drug Administration or The Internal Revenue Service and other governmental agencies.
Business owners often confuse Directors and Officers Coverage with an Errors & Omissions policy. While Errors and Omissions Insurance does protect a small business from financial loss due to negligence and performance failures with respect to its product or services, only D&O coverage offers the added protection of events mentioned above. It is generally is good practice to ask your insurance representative about a combination of the two.
Why You Need Directors and Officers Liability Insurance
Small business owners and people in management positions, whether in a multi-national corporate or locally owned small businesses are often the primary target of any suit brought against their company and should ask their insurance agent if they are currently covered for such situations.