This is a question often asked by insureds when their insurance agent suggest getting a quote for this coverage. Usually insureds think that their General Liability will cover this risk, however, this is truly not the case. As a matter of fact without this coverage Directors and/or Officers of a corporation can be completely exposed personally for their actions should a suit arise.
From large corporations to small businesses to non-profits all can have some degree of exposure and therefore should have Directors and Officers coverage, otherwise known as DNO coverage. For the people on these boards Directors and Officers (DNO) coverage is essential should they be brought into a law suit for their actions and/or decisions which a third party is suing over.
Although many boards do not understand the importance of this coverage for their personal exposures it is vital that corporations have this in place. Unfortunately many board members do not request to see the policy prior to their service to their potential detriment.
There are a number of carriers that offer Directors and Officers coverage however it is limited in comparison to the carriers that write General Liability. There are a few companies that specialize in this coverage one of which is “Monitor”. This carrier for example has broad coverage when compared to other General Liability policies with Directors and Officers included. For this reason it is essential to read and fully understand the coverage afforded in these policies as with any insurance.
As always different carriers may rate differently thus charging different premiums. For this reason obtaining mulitple quotes is important once the coverage is determined to be adequate for the exposures. By requesting different quotes insureds will glean a broader understanding of the carrier’s policy and pricing and will be better informed even if using an insurance agent.
With the internet many companies are available to quote online or over the phone at no cost to the insured or the one seeking this coverage. Usually an application is required along with a Loss Runs report if there was prior coverage. Of course Loss Runs would not be necessary if Directors and Officers coverage was not prior. If this is the case the carrier may request a “no loss” letter stating there have been no knowledge or action against the corporation.
Once a carrier has offered a quote and the insured accepts, the insured can bind coverage with the payment and the board can rest easy knowing that they are personally covered for their actions as a Director or Officer on the board.
