7 Essential D&O Liability Insurance Facts for Directors and Officers

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7 Essential D&O Liability Insurance Facts for Directors and Officers

Navigating the Complexities of Director and Officer Liability

Directors and officers (D&Os) face a growing array of legal and financial risks, making comprehensive D&O liability insurance an essential safeguard. Here are seven key facts to guide your understanding:

1. D&O Liability on the Rise

$345 million: Average D&O claim payout in 2020, according to Advisen
30% increase: Projected growth in D&O premiums from 2023 to 2026, as per Aon

2. Broadening Legal Landscape

directors and officers d&o liability insurance

Increased shareholder activism: Proxy contests and derivative lawsuits have surged
Heightened regulatory scrutiny: Enforcement actions and fines by government agencies have escalated

3. Coverage for a Wide Range of Allegations

D&O insurance protects against allegations of:

Breach of fiduciary duty: Mismanagement of company assets
Misrepresentation: Inaccurate or misleading statements
Employment-related claims: Wrongful termination or discrimination
Cyber risks: Data breaches or ransomware attacks

4. Protection for Individuals

Unlike company insurance, D&O insurance covers individual directors and officers personally. This is crucial because personal assets can be targeted in lawsuits.

7 Essential D&O Liability Insurance Facts for Directors and Officers

5. Tail Coverage: Preserving Protection

Tail coverage extends coverage for claims filed after a director or officer resigns or retires. This is vital for ongoing protection against allegations related to past actions.

6. Selecting the Right Policy

Key factors to consider include:

Limit of coverage: The maximum amount of coverage available
Deductible: The amount the insured pays before coverage applies
Exclusions: Specific risks that are not covered

7. Innovation and Customization

Social inflation: Policies are evolving to address the impact of social media and public opinion on legal risk
Environmental, social, and governance (ESG) concerns: Customized coverage is available to mitigate ESG-related claims

Conclusion

D&O liability insurance is a critical tool for directors and officers to safeguard their personal assets and protect their legal interests. By understanding these seven essential facts, decision-makers can make informed choices to secure comprehensive coverage tailored to their unique needs.

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