Which Organizations Need Directors & Officers Insurance?


Business owners often underestimate their exposure to the threat of lawsuits. While high-profile, headline grabbing cases are usually brought against large public companies and their leaders by disgruntled shareholders, small private businesses which lack the financial means of larger companies may be particularly vulnerable to a damaging lawsuit.

Directors & Officers (D&O) Liability Insurance is designed to protect the personal assets of the people serving as corporate directors and officers of a company if they are personally sued by the organization’s vendors, investors, competitors, customers, or other parties. D&O insurance typically covers legal fees, settlements, and financial losses when the insured is held liable.

The policy is usually purchased by the organization to cover a group of individuals. D&O coverage is an important aspect of a corporate risk management strategy.

Common allegations covered under a D&O policy can include breaches of fiduciary duty, failure to comply with regulations, lack of corporate governance, creditor claims, and reporting errors. Outright fraud, criminal activity, and lawsuits between managers within the same company are usually not covered under the policy.

Which Business Organizations Need D&O Insurance?

Directors & Officers liability insurance applies to any organization that has a board of directors. Businesses working with vendors or government entities or that have employees or customers could have exposures that make the organization and its executives vulnerable to legal action. D&O Insurance can help give leadership the peace of mind to act with confidence.

 D&O insurance is appropriate for all types of companies:

  • Private Companies – an organization that has a business relationship with customers and other third parties could be open to a lawsuit.
  • Public Companies – if you have shareholders, you need D&O insurance. Shareholders who feel misled by the leadership team’s decisions could put the company at risk.
  • Non-profit Organizations – any organization with an advisory board or committee faces the same risks as public and private companies.

Common Parties and Claims Against Companies, Directors and Officers

There are a variety of individuals, groups, and other parties that could file a suit against a business or non-profit organization and its leadership team and directors.  

  • Clients and Customers – could sue for misconduct and failure of the organization to deal with harmful behavior.
  • Competitors – could allege patent and trade secret infringement by their former employee now working for your organization.
  • Creditors – could allege fraudulent misrepresentation if the organization is unable to repay its debt obligations.
  • Donors – could file a suit claiming misrepresentation of monetary donations.
  • Regulatory Bodies – public authorities can investigate and press charges for misappropriation of grant funds.
  • Shareholders – could allege that leadership is not forthcoming in financial communications and misleads stockholders about the financial health of the organization.
  • Suppliers and Third Parties – could claim damages resulting from promised business that never materializes.

There are different forms of policies depending upon the nature of the organization and the risks it faces, so it’s important to seek an insurance company with experience in this specialized type of coverage.

To learn more about Directors and Officers insurance and other types of business insurance available through Enterprise Insurance Services* we invite you to contact us at 978-656-5594 or 877-671-2265.

*All insurance policies offered by Enterprise Insurance Services are placed through our partner, HUB International NE, LLC.  HUB International NE, LLC is not an affiliate of Enterprise Bank or Enterprise Bancorp. 

Insurance products are not a deposit, not guaranteed by Enterprise Bank, are not FDIC Insured, not Insured by any government agency, and may lose value.

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