Directors and Officers Liability Insurance in NJ

January 23, 2019

Protection for board members, directors and officers:

Directors and Officers (D&O) Liability insurance protects the personal assets of corporate directors and officers, and their spouses, in the event they are personally sued by employees, vendors, competitors, investors, customers, or other parties, for actual or alleged wrongful acts in managing a company. The insurance, which protects the company as well, covers legal fees, settlements, and other costs. D&O insurance is the financial backing for a standard indemnification provision, which holds officers harmless for losses due to their role in the company. Many officers and directors will want a company to provide both indemnification and Directors and Officers insurance.

Directors and officers can be sued for a variety of reasons, related to their company roles, including:

  • Breach of fiduciary duty resulting in financial losses or bankruptcy
  • Misrepresentation of company assets
  • Misuse of company funds
  • Fraud
  • Theft of Intellectual property and poaching of competitor’s customers
  • Lack of corporate governance.

Illegal acts or illegal profits are generally not covered under a Directors & Officers policy. Does your business Need D&O Coverage? Any business with a corporate or advisory committee should consider investing in Directors & Officers insurance, including non-profit organizations. Your company does not have to post revenues in the tens of millions of dollars for your directors and officers to be personally sued over their management of company affairs. In fact, smaller businesses with less assets along with those individuals on the board, may actually need the protection more than the large, deep-pocketed corporations.