What is it?
Who needs it?
What is Directors & Officers Insurance?
Leaders are entrusted with significant responsibilities and decisions, and those can present substantial personal risk. Should someone make a harmful decision that negatively effects their organization in California, directors and officers insurance may cover the resulting consequences.
Directors and officers insurance is specialized commercial liability insurance for leaders of organizations. Much like other liability protections, D&O normally helps with legal costs and settlements when a covered claim is filed.
Who in California should carry D&O Insurance?
Most professionals who lead California businesses or nonprofit organizations stand to benefit from the protections that D&O insurance offers. This broadly includes leaders such as:
- Upper Management (e.g. presidents, vice presidents, C-level executives)
- Boards (e.g. chairpersons, board members)
- Other leaders (e.g. directors, officers)
There are still other professionals who might want to purchase a D&O policy. An insurance broker who specializes in this coverage can help professionals whether their situation merits purchasing a policy.
Should volunteer board members and directors carry D&O Insurance?
Simply leading an organization without monetary compensation doesn’t exonerate leaders from risks. Most volunteer board members, directors and other leaders can benefit from D&O insurance, just as paid leaders can.
What incidents are covered by D&O Insurance?
The exact incidents that D&O policies cover are determined by the language of a particular policy. Depending on a policy’s terms, conditions and exclusions, it might cover incidents such as the following:
- Bad investment decisions
- Alleged conflicts of interest
- Inappropriate personnel decisions
- Unauthorized data breaches
- Acts of gross negligence
- Unlawful actions
- Select other errors
In most cases, coverage only applies to these actions when unintentionally committed. Policies typically don’t provide assistance with criminal defense, which might follow illegal acts.
Policies also normally don’t cover simply bad business decisions. Leaders presumably have their poisons because of their qualities and expertise, and making generally good business decisions is part of the expectations. Insurance normally won’t help if leaders fail to accurately identify trends or help an organization adapt.
How much are premiums for D&O Policies?
The premiums charged for D&O policies vary, as they’re based on a multitude of factors. Some of the details that frequently impact cost include the location, type of organization and past claims history.
Organizations can easily find out how much insuring their leaders will cost by talking with an independent insurance broker. Unlike captive brokers who have a special relationship with a certain insurance company, independent brokers are free of any such relationship. Independent ones can thus help clients compare policy options from several different companies.
Do leaders or their organizations pay D&O coverage premiums?
In most cases, organizations pay the premiums charged for a D&O policy. Although the coverage generally applies to leaders, it mostly protects against risks that the leaders are only exposed to because of their positions with an organization. Therefore, the cost of coverage is normally picked up by the organization.
In select situations, volunteer leaders might choose to purchase their own coverage if a nonprofit would struggle to pay a policy’s premiums.
How can professionals who lead California organizations get Directors & Officers Insurance?
For assistance with directors and officers insurance, contact the independent insurance brokers at Heffernan Walton Insurance. Our California brokers know these policies well, and we’ll make sure you get a policy that provides robust coverage.