Directors and Officers Liability (D&O)
Company directors and officers (D&O) operate in an extremely difficult and complex business, legal, and regulatory environment. While you cannot avoid the challenges and risk exposures that arise, you can take steps to protect your own personal assets.
In response to corporate scandals over the past two decades, fundamental principles governing corporate conduct have come under increasing scrutiny. The Sarbanes Oxley Act and other regulations have been enacted to improve corporate governance and financial reporting, and eliminate abuses in executive behavior. Those regulations increase litigation risk for directors and offices of companies found to be in noncompliance.
At the same time, shareholder groups have fomented additional unrest by pressuring corporate management to make swifter changes and improvements to remain economically competitive in the complex world markets.
Protective Action Steps
In light of these challenges, company directors and officers can help protect their personal assets through a combination of:
- Strong corporate governance.
- Broad corporate indemnification.
- A risk transfer program that includes a high-quality D&O liability insurance program.
While there is no single solution for protecting directors and officers from liability, D&O liability insurance can be an effective tool in mitigating overall exposure. Marsh’s D&O liability insurance is designed to protect a firm’s directors and officers for liability due to breaches of duty resulting from negligence, error, or omission.
D&O coverage is typically underwritten on a one-year basis for a single aggregate limit of liability. Many companies also purchase some form of entity coverage or predetermined allocation for securities law claims.