Directors and Officers Insurance
When we talk with clients about Arizona Directors & Officers Liability Insurance, we are referring to a professional liability policy whose coverage provides protection for past, present, and future directors and officers of for-profit companies, privately held firms, nonprofit companies, and educational institutions from damages resulting from acts alleged or actual wrongful acts the directors and officers may have committed in their positions with the company. This type of professional liability policy provides protection in case there is any actual or alleged error, omission, misleading statement given, or breach of duty. In effect, the policies function as “management errors and omissions liability insurance,” covering claims resulting from managerial decisions that have adverse financial consequences. When a company assembles a board of directors, it is a wise business investment to acquire Directors & Officers Liability Insurance coverage. If your company has investors, more than likely a condition will be written into a contract providing funding so that the company will have Arizona Directors & Officers Liability Insurance coverage.
Please note that this type of policy is NOT Errors & Omissions Liability Coverage. Many times clients confuse Directors & Officers Liability Insurance with Errors & Omissions Liability Insurance. The two types of insurance coverage are not synonymous. Arizona Errors & Omissions Liability insurance is concerned with performance, failures, and negligence with respect to your products and services, not the performance and duties of management. Companies such as consultants, insurance brokers, and accountants, to name a few, carry this type of insurance. We encourage these clients that it makes good business sense to carry both Arizona Directors & Officers Liability Insurance and Arizona Errors and Omissions Liability Insurance, if needed.
A Directors & Officers Liability Insurance Policy is very important for any business enterprise that has its officers responsible to investors or stockholders, and if there’s a possibility that a lawsuit is able to breach the business veil and hit executives directly, this insurance will be a safeguard against that scenario as well. Officers of a corporation are assumed to have the obligation of acting in the best interests of the enterprise and its consumers. When an officer makes a side bet against his enterprise or possibly a customer’s assets, his deceitful actions expose the whole enterprise to considerable risk. This type of professional liability coverage can assure danger is mitigated and covered. In effect, the policy functions as “management errors and omissions liability insurance,” covering claims resulting from managerial decisions that have adverse financial consequences.
Some insurance carriers can also include coverage for Employment Practices Liability, i.e., sexual harassment, wrongful termination, discrimination, etc., with shared or separate limits on their Directors & Officers Liability policies. The policy may contain “shrinking limits” provisions, meaning that defense costs—which are often a substantial part of a claim—reduce the policy’s limits if defense costs are included in the policy limits. This approach contrasts with most commercial general liability (CGL) policies in which defense is covered in addition to policy limits. Other distinctive features of D&O policies are that they: (a) are written on a claims-made basis with a retro date, (b) may contain no explicit duty to defend the insureds (when covering for-profit businesses), and (c) cover monetary damages but exclude bodily injury (BI) and property damage (PD).
If your company would like to discuss how an Arizona Directors & Officers Liability Insurance Policy would benefit your company, please contact the professional insurance brokers at PJO Insurance Brokerage.