Directors and Officers insurance is designed to protect directors and officers from claims arising from their decisions or actions made on behalf of the company. But is Directors and Officers Insurance a “claims made” type of insurance? Keep reading to find out.
How Does Directors and Officers Insurance Work?
Directors and Officers Insurance, also known as D&O insurance, is a type of liability insurance that protects directors and officers of a company from legal expenses and settlements arising from lawsuits involving their actions taken on the job.
D&O Insurance usually covers financial loss such as fraud or embezzlement. It may also include coverage against wrongful termination claims, employment discrimination, and breaches of fiduciary duty.
This coverage extends to the company as well as the individual directors and officers. If the company is sued for a wrongful act that fell within the scope of an officer’s or director’s duties, the insurance will cover ensuing legal costs and judgments
While it’s not legally mandated, D&O insurance is an important safety net for companies and their leaders who face exposure to a range of civil and criminal liabilities.
Is Directors and Officers Insurance “Claims Made”?
Like other types of business insurance, Directors and Officers Insurance is a “claims made” type of insurance. Let’s see what this means.
Claims-made insurance is a type of policy that provides coverage for claims that are made during the period the policy is active. This means that it doesn’t matter when the incident that led to the claim occurred; what matters is when the claim is filed.
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However, it’s essential to note that this type of policy usually includes a retroactive date, and any incidents that occur before this date aren’t covered.
So for example, if you have a D&O policy with a retroactive date of January 2021 a client sues you in 2023 for an accident that occurred in June 2021, your policy would provide coverage because the claim was made during the policy period.
If a claim is reported after the policy has ended, there won’t be coverage unless an extended reporting period or “tail” coverage has been purchased.
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