Directors and officers liability insurance

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Directors and Officers Liability Insurance is insurance payable to the directors and officers of a company, or to the corporation itself, to cover damages or defense costs in the event they are sued for wrongful acts while they were with that company.

Typical sources of claims include shareholders, shareholder-derivative actions, customers, regulators, competitors (for anti-trust or unfair trade practice allegations).

Directors and Officers Liability insurance is commonly referred to as D&O in the insurance industry.

Directors and Officers Liability insurance is commonly purchased with a companion product "Corporate Reimbursement insurance", also known as "Company Reimbursement insurance". When purchased together, a single insurance policy is normally issued which is entitled "Directors and Officers Liability and Company Reimbursement insurance". Modern Directors & Officers policies now frequently include cover for the Company Entity itself as well as Employment Practice Liability.

D&O insurance is usually purchased by the company itself, even when it is for the sole benefit of directors and officers. Reasons for doing so are many, but commonly would assist a company in attracting and retaining directors. Where a country's legislation prevents the company from purchasing the insurance, a premium split between the directors and the company is often done, so as to demonstrate that the directors have paid a portion of the premium.

D&O insurance poses corporate governance issues, as it makes it easier for directors or officers to engage in acts they know to be wrong.