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. It is often called D&O insurance for short.
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Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.