What is Directors and Officers Insurance?

by Tom Vocatura on May 27, 2019 1:39:25 PM

Directors, officers and other businesses leaders have a substantial influence on their businesses, and they’re frequently held accountable when mistakes that negatively impact their business are made. Accountability can come in the form of criticism, reduced compensation and dismissal from the company. It can also, at times, come as lawsuits and other actions that are filed directly against leaders. Directors and officers insurance may help protect Massachusetts business leaders from certain covered lawsuits and legal actions that are filed against them.

When business leaders face a covered claim, directors and officers insurance might help pay legal fees, settlements and other costs associated with the claim. In most covered situations, policies will begin offering coverage before culpability is fully determined.

Directors Officers Insurance Massachusetts

Who Purchases D&O Insurance Policies?

Although D&O insurance policies normally provide protection to individuals who lead businesses, it’s frequently the businesses that actually pay for these policies. Businesses will often purchase policies for leaders because the policies offer protection against risks that come with leading a business or other organization. If leaders didn’t accept their roles as heads of companies, they probably wouldn’t need coverage.

What Business Leaders in Massachusetts Need D&O Insurance?

Most business leaders, regardless of whether they’re a C-level executive, president, vice president or something else, can be held highly accountable for their actions. Therefore, almost anyone who has a leadership role with a Massachusetts business might want D&O insurance.

This coverage isn’t only for leaders of businesses, though. Nonprofit organization leaders, possibly including board members, chairpersons and other leaders, may also want coverage. Even though the organizations that these people lead aren’t for-profit companies, the leaders sometimes are held to a similar standard as those who are in charge of businesses.

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What Types of Incidents Does D&O Insurance Protect Against?

D&O policies offer coverage for a wide range of incidents. Depending on a particular policy’s terms and conditions, it might cover conflicts of interest, information leaks, gross negligence, unlawful acts and other items.

Coverage doesn’t give business leaders permission to commit these acts, nor does it necessarily protect leaders from all potential legal consequences. Coverage may, however, assist with settlements and suits arising from such acts.

Who Should Businesses Consult When Purchasing a Directors and Officers Policy?

Generally speaking, multiple people should be involved when businesses are purchasing a business and officers policy. Some of the people whom a business might want to include in the process are:

  • The leader, who will be insured
  • The decision makers, who ultimately decide what policy to get
  • An attorney, who can provide hypothetical legal scenarios
  • An independent insurance agent, who can compare policies from several insurers

When selecting an independent agent, it’s important to work with someone who’s well acquainted with this particular type of insurance. Directors and officers coverage is a highly specialized insurance, and a knowledgeable agent will be able to explain the many nuances of the coverage.

Directors Officers Insurance Massachusetts

How Much Does Directors and Officers Coverage Cost?

Insurance companies take into account many factors when setting directors and officers coverage premiums. A few of the details that they sometimes consider are the number of leaders being insured, the positions of the leaders being insured and whether there’s a history of claims.

For a more accurate quote, businesses and/or leaders should talk with an independent agent. Independent agents are able to compare policies from multiple insurance companies, so businesses can get an accurate idea of what various insurers will charge for coverage.

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How Can Massachusetts Businesses Get Directors and Officers Insurance?

For help finding directors and officers insurance that’ll protect your business’ leaders, get in touch with Charles River Insurance. Our team of independent agents has helped many businesses and leaders in Massachusetts get directors and officers coverage, and we’d be happy to assist your company and its leaders as well.

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