D&O insurance is designed to protect directors, officers, and in some cases the company itself, against claims arising from alleged wrongful acts committed in the course of their duties. Such claims may be brought by shareholders, creditors, employees, or even regulatory authorities.

What Does a D&O Policy Cover? The Three Main Insuring Agreements

Most D&O policies provide protection through three main coverage areas:

• Side A – Individual Coverage provides for the payment of defense costs and indemnification of a director or officer who is not indemnified by the company.
• Side B – Corporate Reimbursement reimburses the company when it indemnifies a director or officer, if permitted or required by law.
• Side C – Entity Coverage offers direct coverage for the company’s liability, particularly in cases involving securities-related claims.

Subject to its terms, limits, and exclusions, a D&O insurance policy will generally cover economic or financial losses resulting from a breach of duty or obligation by a director or officer in performing their duties.

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