Everything about Directors And Officers Liability Insurance totally explained
Directors and Officers Liability Insurance is insurance payable to the directors and officers of a company, or to the corporation itself, to cover damages or defense costs in the event they're sued for wrongful acts while they were with that company.
Typical sources of claims include
shareholders, shareholder-derivative actions, customers, regulators, competitors (for anti-trust or unfair trade practice allegations).
Directors and Officers Liability insurance is commonly referred to as
D&O in the insurance industry.
Directors and Officers Liability insurance is commonly purchased with a companion product "Corporate Reimbursement insurance", also known as "Company Reimbursement insurance". When purchased together, a single insurance policy is normally issued which is entitled "Directors and Officers Liability and Company Reimbursement insurance". Modern Directors & Officers policies now frequently include cover for the Company Entity itself as well as Employment Practice Liability.
D&O insurance is usually purchased by the company itself, even when it's for the sole benefit of directors and officers. Reasons for doing so are many, but commonly would assist a company in attracting and retaining directors. Where a country's legislation prevents the company from purchasing the insurance, a premium split between the directors and the company is often done, so as to demonstrate that the directors have paid a portion of the premium.
D&O insurance poses corporate governance issues, as it makes it easier for directors or officers to engage in acts they know to be wrong.
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