A type of liability insurance covering directors and officers
for claims made against them while serving on a board of directors
and/or as an officer. D&O liability insurance can be written to
cover the directors and officers of for-profit businesses, privately
held firms, not-for-profit organizations, and educational institutions.
In effect, the policies function as "management errors and omissions
liability insurance," covering claims resulting from managerial
decisions that have adverse financial consequences. The policies
contain "shrinking limits" provisions, meaning that defense costs—which
are often a substantial part of a claim—reduce the policy's limits.
This approach contrasts with commercial general liability (CGL)
policies, in which defense is covered in addition to policy limits.
Other distinctive features of D&O policies are that they: (1) are
written on a claims-made basis, (2) usually contain no explicit
duty to defend the insureds (when covering for-profit businesses),
and (3) cover monetary damages but exclude bodily injury (BI) and
property damage (PD). See also
Claims-made coverage trigger;
Errors and omissions (E&O) insurance;
and officers liability insurance;
Shrinking limits defense provision.
Links for IRMI Online Subscribers
D&O Coverage Guide