Directors & Officers insurance provides financial protection for corporate directors and officers when they are sued for alleged wrongful acts in managing a company. D&O policies typically include three coverage parts: Side A (direct coverage for individual directors/officers when the company cannot indemnify), Side B (reimburses the company when it indemnifies directors/officers), and Side C (entity coverage for securities claims against the company itself).
Any organization with a board of directors or executive officers. This includes public and private corporations, private equity portfolio companies, nonprofit organizations, and financial institutions. Companies approaching IPO, raising capital, or entering new markets face elevated D&O exposure. Board members serving in volunteer capacities at nonprofits carry the same personal liability as directors of for-profit companies.
D&O policies are typically written on a claims-made basis, meaning they cover claims first made during the policy period regardless of when the alleged wrongful act occurred (subject to a retroactive date). Policies include duty-to-defend or non-duty-to-defend (indemnity) structures. Side A policies — often purchased as a separate excess layer — are considered the most critical protection as they respond when the company cannot or will not indemnify its directors.
D&O limits typically range from $1M to $25M per policy, with most mid-market companies carrying $5M-$10M in total D&O limits across primary and excess layers. Self-insured retentions (SIRs) for Side B and C range from $25K to $500K. Side A policies typically carry no retention. Premium is driven by company size, industry, claims history, and corporate governance quality.
A mid-market technology company's board approved an acquisition that significantly underperformed projections. Shareholders filed a derivative lawsuit alleging the board failed to conduct adequate due diligence. The D&O policy covered $3.2M in defense costs and a $1.8M settlement — protecting directors' personal assets from the claim.