Understanding D&O Insurance: Protecting Your Leadership and Your Organization

Directors & Officers (D&O) liability insurance is designed to help protect your organization and your personal assets if a claim is made against you for actions taken in your leadership role. Even when your intentions are good and your actions are above board, lawsuits can (and do) happen.

What Does D&O Insurance Cover?

D&O insurance helps cover the cost of defending your organization’s directors and officers when claims related to their management decisions are made against them.

Claims like these typically include:

• Allegations of negligence, mismanagement, or errors in judgment
• Accusations of misleading statements or omissions
• Legal defense costs and settlement expenses

What Does Directors & Officers Liability NOT Cover?

D&O coverage does not apply to physical injuries, intentional wrongdoing, or dishonest acts.

For organizations that also want protection from employment-related claims (like harassment or discrimination), Employment Practices Liability Insurance (EPLI) is often bundled with D&O in a management liability package.

Examples of Common D&O Claims

Unfair Competition

A business hired a new employee who encouraged former coworkers to join them before officially leaving their old job. Although the employer wasn’t involved in the recruiting, the previous employer sued for unfair business practices and trade secret violations. D&O coverage helped pay $500,000 in defense and settlement costs.

Shareholder Disputes

Shareholders of a health and wellness company sued after alleging the board made misleading statements in SEC filings. Although the company was found not guilty at trial, defense costs totaled $2.5 million—all covered under its D&O policy.

Why D&O Coverage Matters

You don’t need to be part of a large corporation to benefit from directors and officers insurance. In fact, many small businesses and nonprofits are just as vulnerable to leadership-related lawsuits and are often less prepared to absorb the costs.

Without D&O insurance:

• Board members’ and executives’ personal assets can be at risk
• The cost to defend a lawsuit can drain your resources—even if you’re not at fault
• Your organization’s reputation and momentum can take a hit during a lengthy legal battle

D&O coverage helps protect your leaders and the mission you’ve worked hard to build.

Things to Know When Choosing a Policy

Not all D&O policies are created equal. There’s no “standard” version—every insurance company has its own forms, terms, and conditions. That’s why it’s essential to:

• Review coverage options carefully
• Compare policy language and limits
• Ask how EPLI or other coverages can be bundled to suit your needs

Let’s Talk Through Your Options

Whether you lead a nonprofit, advise a startup, or sit on a board for a growing company, D&O insurance can give you and your fellow leaders peace of mind.

Talk with a Leavitt Group Texas Select advisor today to review your current coverage, explore your options, and ensure your leadership team is protected where it counts.