Most organizations have a general liability policy that protects members of a company against negligent acts that result in property damage or bodily injury. However, general liability does not protect against accusations of wrongful acts or omissions, such as breaches of duty. To protect members of the company against such accusations, Directors and Officers Liability Insurance was created. While it gets its name for the two most-targeted members of a corporation for personal lawsuits, the coverage of this policy extends to other people in the organization as well.
Coverage for Directors and Officers
The primary coverage for Directors and Officers Insurance follows the largest amount of liability: the executives. This comes from the ability for these top-level employees to make large-scale changes that can affect the entire company, in terms of both its profitability and its liability, as well as having larger personal assets to be targeted in lawsuits. The namesake of D&O Insurance, the Director and the Officer are two keys parts of the company that fit into this coverage.
Director of a Company
Elected or appointed by the shareholders of a company, a board of directors is to act on behalf of the shareholders and be accountable to them. Directors are typically in charge of overseeing the company’s mission, policies, and objects; appointing officer of the company and reviewing them; and determining budgets and reviewing them.
Officer of a Company
An officer of a company is appointed by the board of directors. Typical corporate officers include: a president, at least one vice president, a secretary, and a treasurer. Depending on the size of the company there might be tens or hundreds of officers for the various locations, branches, and subsections of a company. The main responsibility of every officer is the same: the effective operation of the enterprise.
Additional Individuals Protected by D&O Insurance
Most people working for a company won’t have to worry about being targeted by a lawsuit, since their responsibility and personal assets make them unappealing targets compared to the company they are employed by. However, specific individuals due to their position may also be targeted and covered under D&O Liability insurance.
- Committee Members: Much like directors and officers, those who take a place on a committee can find themselves wielding a great deal of power which they are responsible for.
- Volunteers: In non-profit businesses, you may have volunteers taking on high-responsibility positions. While volunteers are not employees of a company, they are covered for liabilities by the company, including D&O liabilities.
Like many policies, Directors and Officers Liability insurance provides flexible coverage over a wide array of liabilities and complements standard insurance for larger companies. Want to learn more about the basics of Directors and Officers insurance? Read our blog on the basics of D&O Insurance here. Want to get free quotes for commercial insurance in the New England Area? Contact the TJ Woods Insurance Agency. We can help with general Business Owner Policies, as well as specialty policies such as Workers’ Compensation, Employee Practices Liability, Directors and Officer Liability, and much more.
