- A directors and officers (D&O) policy refers to the liability insurance held by a corporation or firm. The insurance generally covers the corporation's directors and senior executives in the event of a civil lawsuit. Payable to the officers or their corporation, the policy reimburses the costs and damages from the suit, such as a loss in court, or the defense attorney fees. Depending on the type of D&O policy, the corporation is either partially or fully reimbursed.
- According to Find Law, "as many as 95% of Fortune 500 companies maintain directors and officers ("D&O") liability insurance." A D&O policy is available in several basic forms. Insuring Agreement A coverage is tied directly to losses that result from a claim of wrongful acts. The corporation will not reimburse its directors and executives for damages or losses sustained. Insuring Agreement B is similar in language to Agreement A, except the corporation will compensate its directors and executives for any expenses incurred.
- Entity Securities Coverage is an optional coverage addition to a D&O policy. This add-on protects the corporation against any securities claims. Common security claims often come from investors and can involve claims of investment fraud, pricing violations, bad investment advice and unsuitable investments. The coverage reimburses the corporation even if the directors and executives are not sued in the case.
- Another common addition to a D&O policy the Employment Practices Liability (EPL) coverage deals with any employment-related claims. According to the American Bar Association, EPL insurance is "specially written to insure employers against liability for claims of discrimination, sexual harassment, and wrongful termination by their employees." The employee or a specified third-party often makes the claim in a suit. Like other policies, the corporation and its executives are reimbursed for the costs and damages incurred.
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