Directors Officers Liability

Governance Protection

Corporate decision making involves inherent risks that can lead to litigation if the outcomes are unfavorable to stakeholders. Because directors officers liability resides at the intersection of law and management, it allows leaders to take calculated risks without the immediate threat of personal bankruptcy. The policy typically covers the costs of legal defense and any settlements or judgments awarded.

This safety net is often a requirement for attracting qualified individuals to serve on a board.

Claim Scope

Actions brought by government agencies or disgruntled investors constitute the majority of claims under directors officers liability terms. These claims may involve allegations of misrepresenting financial health or failing to disclose material risks. The policy does not cover bodily injury or property damage, as these fall under different insurance categories.

Instead, it focuses on the financial consequences of management failures and fiduciary lapses.

Indemnity Limit

The total amount of coverage available is determined by the policy limit, which must be shared among all covered individuals. If multiple directors are sued simultaneously, the directors officers liability fund may be depleted quickly by defense costs alone. Companies must balance the cost of premiums against the potential magnitude of a major class action lawsuit.

Insufficient coverage leaves the individuals and the organization exposed to catastrophic financial loss.