Directors and Officers liability insurance (D & O) is like professional liability insurance. It covers managerial decisions, not accidents. These D & O policies are not standardized, but they do have things in common.

Typically, the policies have two parts. One gives the directors and officers direct coverage for their acts. The other covers the corporation for its obligation to reimburse directors and officers.

Important Info: What are the types of D&O Claims?

Claims brought against directors and officers vary.

Example. One claim might be that the stock value was lowered because of decisions, errors, or omissions of the board.

Example. Another claim might come from employees, the public and other businesses harmed by board actions.

Since acts by the insureds are based on personal liability, a claim outlives a director or officer. For that reason, the coverage usually extends to heirs, estates and legal representatives. There may be a spousal extension as well. This covers situations where assets have been transferred to a spouse to hide them from a judgment.

Defense costs are treated differently than the Commercial General Liability Policy (CGL). With the CGL, the insurer has a right and duty to defend the insureds. In a D & O policy, the individual insureds may have responsibility, within limits, for their own defense. This includes hiring their own lawyers.