Directors and Officers Insurance, often abbreviated as D&O, is a type of insurance that protects the members of a company’s board of directors and its executives from lawsuits and claims arising out of decisions these people make in their jobs. It does not protect the employees or other representatives of the company, just the top decision-makers. It is not the same thing as Errors and Omissions Insurance coverage.
The kinds of lawsuits covered by Directors and Officers Insurance can arise from wrongful acts by the directors and officers, errors, misstatements, and neglect of duties. For example, if a company is sued by investors because of perceived poor business decisions affecting the stock price and the chief executive officer and president are named personally in the suit, Directors and Officers Insurance will cover the cost of their defense and some or all of the damages. However, if an individual employee who is not a director or officer is sued because of errors related to the work done for a client then that would be considered an Errors and Omissions Insurance claim. In most cases, larger companies will have Directors and Officers Insurance as well as Errors and Omissions Insurance to cover their exposure to these two different types of liabilities. It is also possible that one lawsuit could trigger both policies if the lawsuit was brought because of the error of an employee, but the head of the company was named in the suit as being negligent.
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