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Directors and Officers Liability Insurance provides financial protection for the directors and officers of a company in the event they are sued in conjunction with the performance of their duties as they relate to the company. Think of Directors and Officers Insurance as a management Errors and Omissions policy.
Directors & Officers Liability Insurance can usually include Employment Practices Liability and sometimes Fiduciary Liability. The former involves harassment and discrimination suits, and is where the majority of exposure will be.
Directors and Officers Insurance is often confused with Errors & Omissions Liability. The two are not synonymous; Errors & Omissions is concerned with performance failures and negligence with respect to products and services, not the performance and duties of management. Generally, it is a good idea to carry both Directors and Officers Liability Insurance and Errors and Omissions Liability Insurance.
Who Needs Directors and Officers Liability?
Liability insurance for the errors, omissions, and other wrongful acts of directors and officers has been available since the early 1960’s. Since that time, the increase in public awareness and expectations, and the more litigious nature of society, has resulted in a virtual explosion of litigation against corporate managers as well as judicial analysis of the conduct and standards applicable to Directors & Officers. The result is that Directors & Officers are frequently being “second guessed” by the courts. Therefore, it is important to be prepared with the proper insurance coverage.