directors' and officers' liability insurance

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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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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.
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.
References in periodicals archive ?
This is especially important to private or closely held organizations, where EPL insurance commonly is sold in combination with directors and officers liability insurance. Surveys consistently have indicated that for smaller or private company operations, allegations from employees relating to discrimination, harassment and wrongful termination are much more likely than allegations of general mismanagement of the organization--primarily because of a lack of large numbers of shareholders in many private businesses.
Galban, a vice president of Chubb & Son and directors and officers liability insurance underwriting manager for Chubb.
To help fill that void, the National Association of Corporate Directors has published Directors and Officers Liability Insurance: A Director's Guide as part of its Directors Handbook series.
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