directors and officers liability insurance (D&O)

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 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 and property damage.