D&O Fundamentals
What does D&O insurance primarily protect?
The personal assets of directors and officers for wrongful acts in their management roles.
What does Side A cover?
Directors and officers when the company cannot indemnify them.
What’s the most common type of D&O claim against private companies?
Employment practices and mismanagement claims.
Which type of organization is least likely to face shareholder lawsuits?
Nonprofit organizations.
A director is sued personally after the company files bankruptcy — which coverage responds?
Side A.
True or False: D&O covers bodily injury claims.
False. It covers management-related wrongful acts, not bodily injury or property damage.
What does Side B cover?
The company’s reimbursement for indemnifying directors and officers.
Name one exclusion almost always found in D&O policies.
Fraud, personal profit, or prior acts exclusions.
What’s a key D&O exposure unique to public companies?
Securities class-action suits.
The company indemnifies its CFO for a defense cost — which coverage responds?
Side B.
What is a “wrongful act” in D&O insurance?
Any alleged act, error, omission, misstatements, neglect, or breach of duty by a director/officer.
What does Side C (Entity Coverage) apply to?
The entity itself for securities claims (public) or certain defined claims (private/nonprofit).
What’s the typical trigger for a D&O claim?
A written demand for monetary or non-monetary relief.
For nonprofits, D&O often bundles with what coverage?
Employment Practices Liability (EPL).
A shareholder lawsuit accuses the company of misleading financial statements — which coverage responds?
Side C (for securities claim).
What entity typically purchases D&O insurance?
The organization, on behalf of its directors and officers.
Which Side typically has no retention?
Side A.
What is a “hammer clause”?
A clause that limits the insurer’s liability if the insured refuses a settlement recommendation.
What’s a key underwriting focus for private company D&O?
Financial condition and management experience.
The board fails to buy proper cyber insurance and faces a negligence claim — covered or not?
Potentially covered as a management decision error under D&O.
What is the typical retention (deductible) applied to Side B or C coverage?
Usually between $10,000 and $250,000, depending on organization size and risk appetite.
What special form provides Side A-only, non-indemnifiable loss coverage?
Side A DIC (Difference in Conditions) policy.
What’s the importance of a “Severability Clause”?
Prevents misconduct of one insured from voiding coverage for others.
What’s one major difference between private and public D&O policy wording?
Public D&O restricts entity coverage to securities claims; private forms are broader.
A former employee sues a nonprofit for wrongful termination — which coverage typically responds?
D&O with EPL extension (if endorsed).