Directors & Officers
Liability Insurance (D&O)

Absolutely — and private company D&O is one of the most underinsured lines in the market. The misconception that D&O is only for public companies ignores where most private company D&O claims actually originate: creditors (including lenders and vendors) suing directors for leading the company into insolvency; minority shareholders alleging oppression or unfair treatment; former employees suing senior management for decisions that don't fit neatly under EPLI; customers and competitors alleging wrongful business conduct by management; and regulators bringing enforcement actions against individual officers. According to Chubb's private company D&O data, over 25% of private companies faced a D&O claim in a recent 5-year period — with an average cost exceeding $387,000 per claim before any verdict or settlement.

A Side A DIC (Difference-in-Conditions) policy is a stand-alone, excess-level policy that provides additional Side A coverage for individual directors and officers — beyond the limits of the primary D&O tower, and on broader terms. DIC policies are designed to "drop down" and pay when the primary D&O policy fails to respond due to insolvency of the primary insurer, exhaustion of limits by Side B/C claims, rescission of the primary policy, or coverage disputes. They are most critical for: public company C-suite executives and directors; independent directors serving on multiple boards; private equity sponsors serving on portfolio company boards; and any director or officer in a company with a highly leveraged capital structure where bankruptcy risk is elevated. Side A DIC is increasingly a negotiating point for director candidates accepting board seats.

The Insured vs. Insured (IvI) exclusion bars coverage for claims brought by one insured against another — most commonly, a claim by the company against its own directors or officers. This exclusion was designed to prevent collusive claims where management and the board engineer a fake dispute to extract D&O insurance proceeds. However, the exclusion creates real coverage problems in legitimate scenarios — including a company's own board suing a former executive for breach of duty, and creditors or bankruptcy trustees (who stand in the shoes of the company) suing directors. Negotiating carve-outs for shareholder derivative suits, bankruptcy trustee claims, and claims by employees (in their employment capacity, not as directors) is essential. Review this exclusion carefully with your broker — the breadth of IvI carve-outs varies significantly across D&O policy forms.

Because D&O is a claims-made policy, coverage ends when the policy is not renewed — and any claims filed after the policy expires (even for acts that occurred before expiration) will not be covered. A run-off policy (also called a tail policy or Extended Reporting Period) extends the time to report claims arising from covered acts that occurred before the policy expired. Run-off policies are critical when: a company is acquired and the surviving entity replaces the target's D&O program; a company winds down or enters bankruptcy; the board is significantly restructured; or the insurer is changed at renewal. Tail length is typically 3–6 years; the cost is usually 150–250% of the annual premium. Critically, run-off must be negotiated and purchased at the time of the triggering event — not after. M&A agreements should explicitly address which party is responsible for purchasing run-off tail coverage as part of deal terms.

Yes — but with important nuances. Most D&O policies cover defense costs in connection with formal SEC investigations, Wells notices, DOJ civil investigative demands, state AG inquiries, and other regulatory proceedings. However, the policy definition of "claim" must specifically include regulatory investigations — not all standard forms do. Criminal defense is typically covered for defense costs only; criminal fines and penalties are uninsurable as a matter of public policy. Civil fines and penalties imposed by regulatory agencies occupy a gray zone — some policies exclude all fines, others cover civil (non-criminal) penalties. SEC disgorgement orders were recently held to be penalties by the Supreme Court (SEC v. Liu), which complicates their insurability. Regulatory investigation sublimits — often $250K–$1M — are common on standard forms; full-limit regulatory coverage requires negotiation with carriers. The adequacy of regulatory investigation coverage is one of the most important D&O coverage questions for any company in a regulated industry.

Corporate indemnification agreements — found in bylaws, articles of incorporation, or standalone indemnification contracts — commit the company to defend and hold harmless its directors and officers for covered claims. D&O insurance works in tandem: Side B reimburses the company for indemnification payments it makes on behalf of directors; Side A steps in when the company cannot or will not indemnify. The strength of the indemnification agreement matters enormously: a properly structured indemnification agreement triggers Side B coverage (which typically has a lower retention), while gaps in the indemnification create Side A exposure (which may carry a higher retention or different coverage terms). Directors should always review both the company's indemnification agreement AND the D&O policy when accepting a board seat — and request copies of both as part of standard director due diligence.

Non-profit directors — including volunteers — carry real personal liability exposure. State volunteer protection statutes provide limited immunity, but these protections typically do not apply to: gross negligence or willful misconduct; actions outside the scope of the volunteer role; duties owed to third parties; or claims in states whose statutes do not apply to the claim type. Non-profit D&O policies cover the organization and its individual board members for claims arising from governance decisions, grant mismanagement, employment actions against executives, state AG investigations, donor disputes, and program management failures. Non-profit D&O is typically priced far more affordably than commercial D&O — a $1M policy for a small non-profit can cost under $2,000 annually. Any organization asking volunteers to serve on a board should have D&O coverage in place as a condition of board service — it protects both the volunteer and the organization's ability to recruit qualified governance talent.

D&O limits should be sized to the maximum plausible single claim scenario — not the average claim. Factors to consider: for public companies, securities class action settlement benchmarks based on market cap and industry; for private companies, the maximum creditor or investor claim relative to company assets; for non-profits, the size of grant funds managed and regulatory enforcement precedents in the sector. As a general benchmark: small private companies ($5M–$50M revenue) typically carry $1M–$3M; mid-market companies ($50M–$500M revenue) carry $5M–$15M; large private companies and PE-backed firms often require $15M–$50M+ in layered towers; public companies are individually benchmarked against peer group litigation history. Side A DIC limits should be evaluated separately based on the personal net worth of key executives and the specific bankruptcy and securities litigation scenarios relevant to the company's capital structure.