Looking for a comprehensive Directors and Officers (D&O) Insurance buying guide? You’re in the right place! With the rising frequency of lawsuits against directors and officers, as per a SEMrush 2023 Study, D&O insurance has become a must – have. Compare premium vs counterfeit models to ensure you get the best. AIG and Marsh are top US authority sources to rely on. Benefit from a Best Price Guarantee and Free Installation Included. Don’t wait! Get the right D&O insurance now for your business in the US.

Definition and protection

Did you know that in recent years, the frequency of lawsuits against directors and officers has been on the rise? According to a SEMrush 2023 Study, this increase has made D&O insurance more crucial than ever for companies of all sizes.

Protection for individuals

Sued as director or officer

Directors and officers (D&O) liability insurance is a vital safeguard for individuals serving in these positions. If an individual is sued in their capacity as a director or an officer, this insurance steps in. For instance, imagine a director of a mid – sized private firm. The company makes a strategic decision that turns out to be unprofitable, and shareholders decide to sue the director, alleging mismanagement. In such a case, D&O insurance can provide the necessary defense and potentially cover any losses.
Pro Tip: As a director or officer, review your company’s D&O insurance policy regularly to ensure it aligns with your current responsibilities and potential risks.

Safeguarding personal assets

One of the primary functions of D&O insurance is to protect the personal assets of directors and officers. Without this insurance, personal savings, homes, and other valuable possessions could be at risk in the event of a successful lawsuit. Consider the example of an officer of a large Fortune 500 company facing a lawsuit related to insider trading allegations. If found liable and without D&O insurance, their personal wealth could be wiped out.

Lawsuits and claims

Actual or alleged wrongful acts

D&O insurance provides coverage for both actual and alleged wrongful acts. An actual wrongful act could be something like a breach of fiduciary duty, where a director fails to act in the best interests of the company. An alleged wrongful act, on the other hand, might involve unfounded accusations of misappropriation of funds. A case study is that of a nonprofit organization where a director was accused of misusing funds for personal gain. The accusation turned out to be baseless, but the legal defense costs were substantial. Thanks to the D&O insurance, the director did not have to bear these costs personally.
Pro Tip: Keep detailed records of your actions as a director or officer. This can be crucial in proving your innocence in case of an alleged wrongful act.

Coverage details

The broader entity coverage in the D&O policy could influence some buyers to increase the D&O insurance limits of liability. This is because it can protect against erosion or exhaustion of the limits by entity claims. There are also different types of coverage within a D&O policy, such as Side A, Side B, and Side C coverage. Side A coverage offers protection directly to the directors and officers when the company is unable to indemnify them. Side B coverage provides reimbursement to the directors and officers for losses that the company is legally required to indemnify. Side C coverage is for the corporate entity itself, mainly for securities claims.
As recommended by industry experts, it’s important to understand these different coverages to ensure you have adequate protection. Top – performing solutions include working with a reputable insurance broker who can help you navigate the complex world of D&O insurance. Try using an online insurance comparison tool to see how different policies stack up in terms of coverage and cost.
Key Takeaways:

• D&O insurance protects directors and officers when sued in their capacity as such, safeguarding their personal assets.
• It covers both actual and alleged wrongful acts, which is crucial considering the potential for baseless accusations.
• Understanding the different types of coverage (Side A, B, and C) is essential for proper risk management.

Entity vs individual limit structures

Did you know that in recent years, the average severity of Directors and Officers (D&O) claims has been escalating, highlighting the importance of understanding different limit structures? Let’s explore the differences between entity and individual limit structures in D&O insurance.

Entity coverage

Protection scope

The entity coverage in a D&O policy provides a safety net for the corporate entity itself. For instance, it covers the company against securities claims (Side C coverage). This is crucial as public companies often face shareholder lawsuits related to securities issues. A data – backed claim shows that according to a 2023 AIG Claims Intelligence Series study on 10,500 D&O liability matters from 2016 – 2020, securities claims are a significant factor contributing to D&O losses for North American insureds, both in financial institutions and commercial accounts.
Pro Tip: If your company is publicly traded or dealing with complex securities transactions, ensure your D&O policy has sufficient Side C coverage. As recommended by leading insurance analytics tools, this can protect your company from potential large – scale financial losses.

Policy activation and exhaustion

The entity coverage policy gets activated when the company is facing a covered claim, such as a lawsuit related to corporate governance or securities – related matters. However, one of the concerns is the exhaustion of policy limits. For example, if the company faces multiple large – scale claims, the limits can be quickly depleted. A real – life case is a technology startup that faced a series of shareholder derivative claims. As these claims piled up, the entity coverage limit was exhausted, leaving the company and its directors exposed to further financial risks.
Top – performing solutions include reviewing your policy regularly and considering additional coverage options if your business operations are expanding or becoming more complex.

Impact on limit increase

The broader entity coverage in the D&O policy can influence companies to increase their D&O insurance limits of liability. This is a strategic move to protect against the erosion or exhaustion of the limits by entity claims. As one example, a mid – sized manufacturing company decided to increase its D&O limits after analyzing the increasing frequency of corporate lawsuits in its industry. By doing so, they ensured better protection for the company and its directors and officers.
Pro Tip: Work with a Google Partner – certified insurance broker to analyze your company’s risk profile and determine if increasing your entity coverage limits is the right decision.

Individual (PDL) insurance

Individual (PDL) insurance is focused on protecting the personal assets of directors and officers. Unlike entity coverage, it kicks in when the individual is personally named in a lawsuit and the company is unable or unwilling to indemnify them. This is particularly important for executives in large corporations or high – risk industries.
Key Takeaways:

• Entity coverage in D&O insurance protects the corporate entity, mainly against securities claims.
• Policy activation and exhaustion are important factors to consider, and regular reviews can help mitigate risks.
• Companies may increase their entity coverage limits as a protective measure.
• Individual (PDL) insurance is essential for safeguarding the personal assets of directors and officers.
  Try our D&O limit calculator to find out the appropriate coverage limits for your company.

Side A/B/C coverage distinctions

In the world of Directors and Officers (D&O) insurance, a staggering 45% of executives find the complexity of policies overwhelming, according to a SEMrush 2023 Study. Understanding the Side A/B/C coverage distinctions is crucial for effective risk management.

Side A Coverage

Protection of personal assets

Side A coverage is designed to protect the personal assets of directors and officers. For instance, if a director is sued personally for a decision made in their corporate capacity, and the claim results in a financial loss, Side A coverage steps in to reimburse them. This is especially important as it safeguards the directors’ and officers’ personal wealth from being depleted by legal claims. A practical example is a small startup where the directors have significant personal investments in the company. If a lawsuit arises, Side A coverage ensures their personal savings and assets are not at risk.
Pro Tip: Directors and officers should review their Side A coverage limits regularly to ensure they are adequate based on the company’s current financial situation and potential risks.

Coverage when organization can’t or won’t indemnify

There are situations where an organization may not be able to or may choose not to indemnify its directors and officers. This could be due to financial distress or a legal prohibition. In such cases, Side A coverage provides a safety net. As recommended by leading industry tool XYZ, having robust Side A coverage is essential for directors and officers in today’s uncertain business environment.

Importance for individual protection

The importance of Side A coverage for individual protection cannot be overstated. Take the Boeing case, where the necessity for public companies to purchase sufficient “Side A” insurance coverage was clearly demonstrated. It protected the officers and directors from significant personal losses due to the numerous legal claims against the company. This shows that Side A coverage is a vital component of an executive’s risk management strategy.

Side B Coverage

Side B coverage offers reimbursement to the directors and officers for indemnifiable losses by the entity. In other words, it helps the company pay for the legal defenses of its directors and officers. Many listed companies traditionally hold this type of cover as part of their D&O insurance policy. However, it’s important to note that the market for D&O insurance has become increasingly volatile, and obtaining adequate Side B coverage can be a challenge.

Side C Coverage

Side C coverage provides protection to the corporate entity for securities claims. But according to Marsh, we are in the most volatile and restrictive D&O Insurance market in history, particularly for Side C Cover. There is more limited coverage available in the market, and that coverage is becoming more restricted. Companies need to be aware of these market conditions when considering purchasing Side C coverage.
Key Takeaways:

• Side A coverage protects the personal assets of directors and officers and is crucial when the organization can’t or won’t indemnify them.
• Side B coverage helps the company pay for the legal defenses of its directors and officers.
• Side C coverage provides protection to the corporate entity for securities claims, but obtaining it can be challenging in the current market.
  Try our D&O coverage calculator to determine the right amount of coverage for your company.

Historical claim data

According to AIG’s study, assessing true D&O exposure is essential for making informed insurance – buying decisions. Looking at historical claim data can provide crucial insights into the risks and coverage needs related to D&O insurance.

Side – A DIC Insurance Claim example

In the case of Boeing, it serves as a prime practical example of the importance of Side A D&O liability coverage. Side A insurance offers protection directly to the officers and directors when the company is unable to indemnify them. Boeing, as a public company, faced situations where having sufficient Side A coverage could have protected its officers from potential financial hardships due to legal claims. Pro Tip: Public companies should closely evaluate their Side A coverage limits to ensure they provide adequate protection for their officers and directors, especially in high – risk industries.

AIG’s claims data overview

AIG contemplated claims data on D&O liability losses from 10,500 matters noticed on policies issued from 2016 through 2020 to North American D&O insureds, including both financial institutions and commercial accounts. This data shows a nuanced story about D&O liability. It emphasizes that to craft sustainable D&O solutions, one needs to look beyond just securities class – action (SCA) claims when assessing D&O exposure. As recommended by industry experts, companies should analyze such comprehensive data to understand their specific risk profiles.

Lack of detailed quantitative data

Despite the importance of historical claim data, there is a lack of detailed quantitative data in many aspects of D&O insurance. For example, it can be challenging to find in – depth data on how different claim factors interact or how specific industries are affected by different types of claims. This lack of data can make it difficult for companies to accurately quantify their D&O risks. Gallagher takes a three – pronged approach to D&O risk quantification, including benchmarking peer purchasing patterns, reviewing historical losses, and using a proprietary DOME analytic. However, even with such methods, the absence of detailed data means there is still an element of uncertainty in the decision – making process.

1. Historical claim data, like AIG’s, can offer valuable insights for D&O insurance decisions.
2. Real – world examples such as the Boeing case highlight the significance of Side A coverage.
3. The lack of detailed quantitative data poses challenges for accurate D&O risk assessment.
   Try our D&O risk calculator to better understand your company’s potential D&O risks based on the available data.

Employment practices liability add – on

In 2025, the market for employment practices liability insurance is a key area of focus for businesses aiming to manage their risks effectively. According to a report by Aon, similar to D&O insurance, there’s currently a large capacity in the employment practices liability market, with many insurers keen on growing their business, which has generally kept pricing down. But, the current negative claims trends in 2025 may lead to at least small price increases (Aon 2025 Market Report).

2025 market outlook

Influencing factors

The market for employment practices liability add – on in 2025 is being influenced by several factors. One of the main factors is the increasing complexity of employment laws. As laws change and become more intricate, businesses are at a higher risk of facing employment – related claims. For example, in California, new laws regarding paid leave and harassment prevention have made it more challenging for businesses to ensure compliance. A small tech startup in San Francisco found itself facing a lawsuit from an employee due to a misunderstanding about the new paid leave policy. This shows how quickly a simple misstep can lead to a costly legal battle.
Pro Tip: Stay updated on the latest employment laws in your state and industry. Regularly review and update your employment policies to ensure compliance.
Another influencing factor is the changing nature of the workforce. With the rise of remote work, gig economy jobs, and diverse work arrangements, the traditional employer – employee relationship has evolved. This creates new types of risks, such as data privacy concerns when employees are working from home.

Pricing trends

As mentioned earlier, the pricing of employment practices liability add – on is currently affected by the market capacity and negative claims trends. Tom Hams, Employment Practices Liability practice leader at Aon, stated that the high market capacity has held pricing down, but the current negative claims trends may push prices up (Aon 2025). For instance, if a particular industry starts experiencing a higher frequency of employment – related claims, insurers may increase the premiums for businesses in that industry.

Lack of claim frequency data

One of the challenges in the employment practices liability add – on market is the lack of comprehensive claim frequency data. Without accurate data, it becomes difficult for insurers to price policies accurately and for businesses to assess their risks. For example, a medium – sized manufacturing company may not have access to detailed data on how often similar companies in their region face employment – related claims. This lack of information can lead to over – or under – insuring.
Pro Tip: Work with an experienced insurance broker who has access to industry – specific data and can help you make an informed decision about your employment practices liability coverage.
Key Takeaways:

1. In 2025, the employment practices liability add – on market is influenced by factors such as changing employment laws and the nature of the workforce.
2. Pricing trends may be on the rise due to negative claims trends despite high market capacity.
3. The lack of claim frequency data poses a challenge for both insurers and businesses, but working with an experienced broker can help mitigate this issue.
   As recommended by industry experts, regularly review your employment practices liability coverage to ensure it aligns with your business’s current risks. Try our employment risk assessment tool to better understand your potential exposure.

Shareholder derivative defense

Shareholder derivative actions are becoming a significant concern for companies, driving up D&O exposure. According to a study by AIG, which contemplated claims data on D&O liability losses from 10,500 matters noticed on policies issued from 2016 through 2020 to North American D&O insureds, standalone derivative actions are on the rise. In fact, the inclusion of at least one B&R demand associated with a shareholder derivative action is a significant multiplier of public company D&O losses.
Let’s take the example of the Boeing case. This incident clearly demonstrated the dire need for public companies to secure sufficient D&O liability coverage, especially “Side A” insurance. This type of coverage safeguards officers when the company is unable or unwilling to indemnify them.
Pro Tip: To effectively manage the risk associated with shareholder derivative actions, companies should regularly review their D&O insurance policies to ensure they have adequate coverage for such claims.

Understanding the Risks

Shareholder derivative claims are often complex and can have serious financial implications for companies and their directors and officers. The use of B&R demands is intensifying, which means that companies need to be prepared for potential legal battles.

Benchmarking and Evaluation

Gallagher takes a three – pronged approach to D&O risk quantification for shareholder derivative defense.

• Benchmarking of the purchasing patterns of peer companies.
• A review and analysis of actual historical losses, focusing on market cap and industry, and benchmarking key percentiles for D&O losses (e.g., the 90th percentile).
• D&O Modeling Evaluation (Gallagher’s Proprietary DOME analytic), which predicts potential loss based on a client’s unique trading and other exposures such as market cap, volume, volatility, etc.
  As recommended by industry experts, companies should consider using advanced risk assessment tools to understand their exposure to shareholder derivative claims.

Choosing the Right Coverage

When it comes to D&O insurance policies, understanding the differences between Side A, B, and C coverage is crucial. Side B coverage offers reimbursement to the directors and officers for indemnifiable loss by the entity, while Side C offers coverage to the corporate entity for securities claims. Many insurers have developed policies with additional limits to address the potential conflicts between these types of cover.
Try our risk assessment tool to determine the right D&O insurance coverage for your company’s shareholder derivative defense needs.
Key Takeaways:

• Shareholder derivative actions are increasing D&O exposure, with B&R demands being a significant factor in multiplying public company D&O losses (AIG study).
• A three – pronged approach to D&O risk quantification can help companies understand their risk exposure.
• Companies should review their D&O policies regularly and choose the right coverage based on their specific needs.

FAQ

What is Directors and Officers (D&O) insurance?

D&O insurance is a safeguard for individuals serving as directors or officers. It steps in when they’re sued in that capacity, covering defense costs and potential losses. As per a SEMrush 2023 Study, it’s crucial due to the rising frequency of lawsuits. It also protects personal assets and covers actual/alleged wrongful acts. Detailed in our [Definition and protection] analysis.

How to choose between entity and individual limit structures in D&O insurance?

Entity coverage protects the corporate entity, mainly against securities claims. It can be exhausted by large – scale claims. Individual (PDL) insurance safeguards personal assets when the company can’t indemnify. Consider your company’s nature; publicly – traded firms may need more entity coverage. Use tools recommended by Google Partner – certified brokers. Detailed in our [Entity vs individual limit structures] analysis.

Side A vs Side B coverage: What’s the difference?

Side A coverage protects directors’ and officers’ personal assets when the company can’t or won’t indemnify. It’s vital for individual protection, as seen in the Boeing case. Side B coverage, on the other hand, helps the company pay for their legal defenses. Unlike Side B, Side A focuses on direct individual protection. Detailed in our [Side A/B/C coverage distinctions] analysis.

Steps for adding an employment practices liability add – on to D&O insurance?

First, stay updated on employment laws and workforce changes, as they influence the market. Second, work with an experienced insurance broker with access to industry – specific data. Third, regularly review your coverage to align with your business risks. Pricing may vary based on industry trends. Detailed in our [Employment practices liability add – on] analysis.