Why is D&O insurance important, particularly if a company is not publicly traded?
This insurance is important because it provides coverage directly to the directors and officers in situations where the company is unable to offer personal asset protection for these individuals. Directors and officers have an obligation to a company’s shareholders, the company itself and other third parties. This obligation is present regardless of whether or not the company is publicly traded, privately held or even nonprofit. People who serve as directors and officers are exposed to personal liability as a result of their acts or failure to act with respect to these duties. While a company will typically offer indemnification for this liability, there are potential gaps. The D&O policy is designed to step in a fill these gaps and respond in the event that a claim is made against a director or officer for a wrongful act. The policy provides coverage for defense costs as well as judgments and settlements. What is the biggest potential exposure that D&O insurance covers? For public com
This insurance is important because it provides coverage directly to the directors and officers in situations where the company is unable to offer personal asset protection for these individuals. Directors and officers have an obligation to a company’s shareholders, the company itself and other third parties. This obligation is present regardless of whether or not the company is publicly traded, privately held or even nonprofit. People who serve as directors and officers are exposed to personal liability as a result of their acts or failure to act with respect to these duties. While a company will typically offer indemnification for this liability, there are potential gaps. The D&O policy is designed to step in a fill these gaps and respond in the event that a claim is made against a director or officer for a wrongful act. The policy provides coverage for defense costs as well as judgments and settlements. What is the biggest potential exposure that D&O insurance covers? For public com
