Definition of D&O Insurance

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D&O insurance is also commonly referred to as directors and officers liability insurance. Get a definition of D&O insurance with help from an insurance professional in this free video clip.

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Video Transcript

Hi, I'm David Sumpter, Commercial Insurance Specialist with Wateridge Insurance in San Diego. And today, we're going to talk about D & O Insurance. Well, let's start with what is D & O? Directors and officers liability insurance is a policy that was created because general liability coverage does not provide for this. Directors and officers liability is a policy that provides for a limit to pay for the defense cost of officers and directors when they're sued. Let's back up a little bit. Officers and directors can be held personally responsible when they make decisions that devalue the stock of a company. Where does that come from? Shareholders and stakeholders can sue those officers and directors saying, "You know, if you hadn't made that decision, my stock would have been valued at a $100 and now it's worth $10. I'm suing you for the difference." Okay. So, directors and officers liability coverage steps in and says, "Okay, if that situation comes about, we're going to provide a limit, say a million dollars for defense and settlement provisions." That maybe included in your limit, I'm sorry, defense cost maybe included in your limit or they maybe unlimited, it depends on what policy form you got. Check with your broker, they'll help you out. Big thing to look out about D & O coverages and deductible, they're typically pretty big, 10, 25, 50 thousand dollars. So again, go through the coverage with your broker, make sure that you have the coverage that you need and that it's reasonable. Saving a little bit money with a 50 thousand dollar deductible, you got to think, are you going to be able to pay that 50 thousand dollars when the insurance carrier comes calling. So, directors and officers coverage has three parts; coverage J, coverage B, coverage C. We don't have time to go it over here, but I know your insurance broker does; so check with them. Directors and officers liability coverage is absolutely crucial. Why? If you don't put it in place, you maybe putting your personal assets at risk; so check again with your broker and look at your policy to see that you have the right coverage. And if you don't have that coverage, consider purchasing it, it's well-worth it. I'm David Sumpter, Commercial Insurance Specialist with Wateridge Insurance and now you know about D & O coverage.


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