A Simple Guide to Directors’ and Officers’ Liability Insurance

Unlike a commercial general liability insurance (CGL) policy that provides coverage for claims arising from property damage and bodily injury, a directors’ and officers’ liability (D&O) policy specifically provides coverage for a “wrongful act,” such as an actual or alleged error, omission, misleading statement, neglect or breach of duty—which can include Fiduciary Duty, Negligence Duty and Statutory Duty (Employment standards, Income Tax Act, Environmental Legislation).

A D&O policy provides defence costs and indemnity coverage to the entity listed on the policy, which may include the following:

  • Coverage for individual directors, officers and management
  • Protection for the organization or entity itself
  • Reimbursement to the business for a contractual obligation to indemnify directors and officers who serve on the board

What Protections Does D&O Liability Insurance Offer?

Typical Coverage Inclusions

  • Entity coverage
  • Payment priority for insured persons
  • Severability of the insured as well as severability of the application
  • Coverage over time—for past, present, and future directors and officers
  • Pay on behalf clause

Note:  A “fraud” exclusion is typically included in a D&O policy, which eliminates coverage for losses due to dishonest or fraudulent acts or omissions, or willful violations of any statute, rule or law.

Did You Know?

Statistics show that shareholders and employees are the most likely group to sue private companies. Other parties may bring suits, such as the corporation itself, competitors, creditors, regulatory bodies, etc.

Working Together

Manutech AdvantageTo help ensure both your officers’ and the company’s well-being, a directors’ and officers’ liability insurance (D&O) policy is part of a comprehensive risk financing strategy.

To get started or to learn more please contact Aaron MacFarlane, member of Manutech Advantage, industry specialists helping manufacturers with risk management and business consultation.

Author Profile

Lawrie Insurance GroupRanked in the top 5% of independent brokerages in Canada, Lawrie Insurance Group is a privately owned and operated insurance brokerage with over 100 employees specializing in all areas of personal and corporate property/casualty insurance, employee benefits, financial services, and group retirement products.

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This is a post by a Guest Author. Disclaimer: The author's views are entirely his or her own, and don't necessarily reflect the opinions of Mentor Works Ltd.

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