Directors and Officers Liability (D&O)

Public, private, and non-profit companies face complex exposures, which can make their directors and officers targets of litigation. Marsh can help clients develop innovative risk transfer solutions that offer critical protection.

Lawsuits against public, private, or non-profit organizations and their directors and officers can disrupt business, damage reputations, and be financially devastating. Claims accusing directors and officers of wrongdoing in their management roles can come from many sources, including shareholders, customers, suppliers, regulators, and creditors.

Events that can trigger D&O litigation are also broad. From cyber-related losses, to financial disclosures, to the response to pandemics and natural disasters, organizations and management teams face a growing list of liability exposures — across all industries.

D&O liability insurance is an effective way to protect your organization and your directors' and officers' personal assets. Our team has deep expertise in D&O risk and coverage options. We can help you build the program that best suits your company’s individual needs.

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FAQs

Liability exposures can vary for directors and officers of public companies and those at private or non-profit organizations.

Public company directors and officers typically face more scrutiny of their management decisions due to regulatory and legal requirements to disclose financial and operational information. Securities lawsuits by shareholders or regulators are a common type of D&O risk for public companies.

While private and non-profit organizations do not have the same disclosure requirements, they nevertheless can face lawsuits alleging wrongdoing or harm from customers, vendors, regulators, or other sources. Employment practices lawsuits, rather than securities claims, are a common exposure for private companies and non-profits.

Directors and officers of all organizations, however, can face liability exposure for cyber-related losses, such as data breaches, among other things.

D&O liability insurance typically contains three sections, often referred to as "sides." Each side provides a different coverage component, making it critical to understand all three:

  • Side A: Often called "personal asset protection," Side A D&O is solely for directors and officers. This coverage is triggered if the organization is unable or unwilling to indemnify them. This element of coverage can be critical in order to attract qualified directors and officers.
  • Side B: Known as "company reimbursement" coverage, Side B insures your organization for the covered costs of indemnifying your directors and officers.
  • Side C: Also called "entity" coverage, Side C offers balance sheet protection when the organization itself is named in litigation. This is generally limited to securities claims for public companies.

Various movements and stakeholders are promoting corporate accountability for environmental, social, and governance (ESG) activities. These often shine a spotlight on organizational practices, including:

  • Operations with high-carbon emissions
  • Use of renewable energy sources
  • Human rights and labor practices in developing countries
  • Board diversity
  • Responsible investment strategies
  • Executive compensation

This can add accountability pressure on directors and officers for the impact of their decisions, which could lead to regulatory and legislative action, litigation, or force a business to amend its plans and practices.

Our people

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Matthew T. McLellan

D&O Product Leader, FINPRO, Marsh Specialty

  • United States