| directors' and officers' liability insurance A type of insurance taken to protect a firm's directors and officers against lawsuits  mainly suits instituted by unhappy shareholders of the firm. Directors' and officers' liability insurance has become more expensive and more difficult to obtain in recent years as the number of lawsuits has increased dramatically. Companies find it very difficult to recruit outside directors unless the candidates are supplied with liability insurance. Also called D&O Coverage. |
Directors' and Officers' Liability Insurance
Insurance a publicly-traded company purchases to reimburse senior management, or the company itself, for damages and legal expenses incurred as the result of a lawsuit for negligence. For example, if the board of directors' actions led to a massive loss for the company resulting in a lawsuit, directors' and officers' liability insurance will cover the cost of the lawsuit for the company as a whole and the individual directors. It is important to note that directors' and officers' liability insurance does not cover intentionally wrong actions, only negligence.
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