Directors and Officers (D&O) Insurance
Directors and officers can be sued personally for decisions they make running an organization. D&O insurance protects their personal assets, and the organization itself, from claims by investors, lenders, regulators, competitors, vendors and others. It matters for private companies, nonprofits and associations, not just public companies.
Reviewed by Nate Feuerman, High Net Worth Insurance Producer at Stonebrook
Last updated
Quick answers
What does D&O insurance cover?
Claims alleging wrongful acts in managing an organization, such as mismanagement, breach of duty or misrepresentation, including defense costs.
Do private companies need D&O?
Yes. Investors, lenders, vendors, competitors and regulators can all bring claims against private company leaders.
Do nonprofits need D&O?
Yes. Board members of nonprofits and associations can be sued personally, and many won’t serve without D&O.
Is D&O claims-made?
Yes. D&O covers claims first made during the policy period.
Side A, Side B and Side C.
Most D&O policies have three insuring agreements.
Individuals, uncovered
Pays directors and officers directly when the organization can’t or won’t indemnify them, such as in bankruptcy.
Reimbursement
Reimburses the organization when it indemnifies its directors and officers.
Entity coverage
Covers claims against the organization itself. For private companies and nonprofits it is usually broader than for public companies.
Defense costs
Legal fees, often advanced as they are incurred.
Employment practices
Many private and nonprofit D&O policies offer EPLI in the same package.
Fiduciary and crime
Benefit plan fiduciary liability and employee theft can be added to a management liability package.
Where D&O claims come from.
- Investors and shareholders.Claims of mismanagement, misrepresentation or breach of duty.
- Lenders and creditors.Especially when a business struggles financially.
- Regulators.Investigations and enforcement actions, depending on the policy.
- Vendors and competitors.Contract, antitrust and unfair competition allegations.
- Members and donors.Common for nonprofits and associations.
D&O for healthcare and real estate.
Healthcare operators, including senior living, skilled nursing and adult day care programs, face regulatory investigations and governance claims. Many are nonprofits whose boards need protection.
Real estate entities and condominium or homeowner associations need D&O for board decisions on budgets, assessments, contractors and enforcement.
A D&O policy does not cover data breaches or professional mistakes. See cyber and errors and omissions.
A broker who knows your business.
Stonebrook is an independent agency. We work with standard, specialty and excess and surplus lines carriers, so we can shop D&O across management liability carriers instead of fitting you into one company’s program.
Since 1982 we have placed commercial programs for businesses and property owners across the country. We read the fine print, flag the exclusions that matter for your operation, and advocate for you at underwriting, at renewal and at claim time.
Coverage that works together.
Most families need more than one policy. Here is how the pieces fit.
D&O questions, answered.
What does directors and officers insurance cover?
D&O covers claims alleging wrongful acts by directors and officers in managing an organization, such as mismanagement, breach of fiduciary duty or misrepresentation, including defense costs, settlements and judgments. Many policies also cover the organization itself.
What is the difference between Side A, B and C?
Side A pays individual directors and officers when the organization can’t indemnify them. Side B reimburses the organization when it does indemnify them. Side C covers claims against the organization itself.
Does a private company need D&O insurance?
Yes. Private company leaders face claims from investors, lenders, vendors, competitors, regulators and others, and D&O is often required by outside investors.
Do nonprofit board members need D&O?
Yes. Nonprofit directors can be personally named in lawsuits, and many experienced board members won’t serve without D&O coverage.
Does D&O cover employment claims?
Not by itself in most cases. Employment practices liability is usually a separate coverage part, often packaged with D&O for private companies and nonprofits.
Is D&O claims-made?
Yes. Claims must be first made during the policy period. Keep coverage continuous and review prior acts and run-off coverage when the organization is sold or merges.
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