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Home > Blog > Who Does Directors and Officers Insurance Cover?
WEDNESDAY, OCTOBER 21, 2020

Who Does Directors and Officers Insurance Cover?

Directors and officers insurance is a policy designed to protect the key employees of your business in case of a lawsuit. But who are your key employees? Is everyone covered who needs coverage?a man sitting at a table with a knife

 

Most of the rime, directors and officers insurance (D&O insurance) covers the corporate directors, officers and managers of a business. Anyone serving on a board or in a position of power may be added to this type of policy. There are blanket policies that simply cover all of your key employees, but there are also named policies, where you can name specific employees you wish to be covered. A named policy may provide more protection for specific employees than a blanket policy, but it may also limit who is covered. 

 

Not only employees are covered, either. D&O insurance is designed to cover the personal assets of your employees and their spouses, so your key employees’ spouses can be covered under this insurance, as well. 

 

What Does Directors and Officers Insurance Cover Against? 

Directors and officers insurance is unique compared to policies such as professional liability, as covered claims can come from many different places. This insurance can cover claims against your directors and officers from other employees, vendors, investors, competitors, customers and more. 

Most of these claims regard:

 

  • Breach of fiduciary duty 

  • Misuse of company funds 

  • Fraud 

  • Failure to comply with workplace laws 

  • Theft of intellectual property 

  • Misrepresentation of company assets 

 

Anyone with a financial stake may eventually file a claim against one of your key employees for their activity on the board. 

 

Employee Claims Against Employees

 

If an employee files a lawsuit against their employer, directors and officers insurance may cover the resulting expenses. Make sure that your D&O insurance policy also comes with Employment Practices Liability. Employment Practices Liability Insurance (EPLI) covers claims regarding certain employment practices conducted by directors and officers. This includes claims of discrimination, sexual harassment, wrongful termination, breach of employment contract, negligent evaluation, failure to promote, wrongful discipline, mismanagement of employee benefit plans and more. 

 

Essentially, if an employee feels that they have been wrongly treated or denied certain rights, they may file a claim against their immediate manager or those above to receive compensation. This can cover previous, current and potential employees. 

 

Make sure your directors and officers insurance includes EPLI so that all of your key employees have the highest amount of coverage needed. 

Posted 4:44 PM

Tags: directors, officers, insurance, policy, coverage
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