Directors and officers insurance
Can help your company’s leaders and, where included, the company respond to covered claims about management decisions.
How the coverage can help
A decision. A claim against leadership.
The incident
A disclosure claim
An investor says your leaders misstated revenue while fundraising.
Potential policy response
Legal defense
The cost of defending insured leaders against a covered claim.
Covered damages
Covered settlements or judgments under the policy’s terms.
Who is insured and when the company is covered vary by policy. D&O does not make every management dispute a covered claim.
The fit
Who it’s for
Organizations with directors, officers or outside investors should review management-liability exposures. Funding or board agreements may require D&O. It addresses specified claims about leadership decisions rather than serving as general coverage for the organization’s products or services.
The protection
What it can cover
- Claims against company leaders.
- Coverage may help defend directors and officers accused of wrongful acts in their management roles and pay covered damages.
- Company reimbursement.
- If the company pays covered defense costs or damages on behalf of a leader, the policy may reimburse it. This is often called Side B coverage.
- Protection when the company cannot pay.
- Side A coverage can protect leaders when the company cannot legally or financially indemnify them—meaning cover their losses. Separate company coverage, often called Side C, depends on the policy.
Follow a claim
From the incident to the insurance.
Scenario 01
An investor disputes your fundraising disclosures.
What happened
After a funding round, an investor disputes your revenue figures. They claim your leaders misled them.
What the business faces
Founders and directors face a claim about their disclosures. They need legal advice to respond to the investor.
Where this policy may help
D&O may cover defense and damages. Proven misconduct can be excluded even when allegations are defended.
Scenario 02
A management decision is challenged.
What happened
A shareholder challenges a company transaction. They allege your directors mishandled the decision.
What the business faces
The shareholder says the decision caused a financial loss. Directors need legal advice to answer the claim.
Where this policy may help
D&O may pay defense costs and covered damages. The claim must fall within the policy’s terms and limits.
Illustrative scenarios. Whether a policy responds depends on the claim, policy terms, limits and exclusions.
Know the difference
Different policies. Different jobs.
Different policies address different losses. These comparisons explain where to look; they do not mean every coverage mentioned is available through Komodo.
Directors and officers insurance
Concerns covered claims about how the organization is managed.
Professional liability
Concerns covered claims about work or advice delivered to customers.
What to check Use D&O for claims about running the company and tech E&O for claims about technology delivered to customers. One does not replace the other.
Directors and officers insurance
Addresses covered management claims.
Employment practices liability (EPLI)
Addresses specified employment claims, such as discrimination, harassment or wrongful termination.
What to check When hiring, evaluate EPLI separately even if you buy it in the same package as D&O. A management-liability package name alone does not show which sections you purchased.
Directors and officers insurance
Addresses covered claims against leaders for management decisions.
Fiduciary liability
Commonly addresses responsibilities for employee benefit plans, such as retirement plans.
What to check When offering a retirement or other benefit plan, evaluate fiduciary liability for plan-related responsibilities. The fact that directors also have fiduciary duties does not make D&O and fiduciary liability interchangeable.
Directors and officers insurance
Addresses covered claims about management decisions.
Commercial crime
Addresses specified theft and fraud losses.
What to check A shareholder challenging a leadership decision is a D&O question. Recovering money stolen by an employee is a crime-insurance question.
Good questions
Before you decide
What is D&O insurance?
Directors and officers insurance may help with covered claims against company leaders arising from management decisions. Some sections also cover the company, as defined by the policy.
Who needs it?
Organizations with a board or outside investors may have D&O exposures or contractual requirements. Private companies, startups and nonprofits should review their own structure and activities.
What does it cover?
It may pay defense costs, settlements or judgments for covered allegations such as mismanagement or breach of duty. Who is insured and which claims qualify depend on the policy.
Who can sue directors and officers?
Claims may come from investors, creditors or other parties. The claimant and allegation matter because exclusions or other coverage sections may affect the response.
What isn’t covered?
Review misconduct, prior-claim, bodily injury and other exclusions. Allegations and final findings can be treated differently; employment and benefit-plan claims may require separate coverage.
What are Side A, B and C?
Side A generally covers insured individuals when the company does not indemnify them. Side B reimburses covered indemnification by the company. Side C provides defined entity coverage. The scope and shared limits vary by policy.
Do investors require it?
Investors or outside directors may require D&O coverage. Review the funding or board agreement and any required limits before the relevant deadline.
What does a claim look like?
Illustrative example: a shareholder alleges that directors mismanaged an acquisition. D&O may help with covered defense costs or a settlement, subject to policy terms.