Texas General Lines — Property and CasualtyCommercial LinesEasy
A publicly traded corporation is concerned about potential lawsuits against its board members and officers for decisions they make in their corporate capacity. These lawsuits could stem from allegations of mismanagement, breach of fiduciary duty, or misrepresentation. What type of liability insurance would specifically protect the directors and officers in such situations?
- ADirectors and Officers (D&O) Liability
- BEmployment Practices Liability (EPLI)
- CCommercial General Liability (CGL)
- DProfessional Liability (E&O)
Show answer & explanationAnswer & explanation
Correct answer: A. Directors and Officers (D&O) Liability
Directors and Officers (D&O) Liability insurance is specifically designed to protect the personal assets of corporate directors and officers against lawsuits alleging wrongful acts in their management capacity.
Why the other options are wrong
- B. EPLI covers claims arising from employment-related issues like discrimination, harassment, or wrongful termination.
- C. CGL covers bodily injury, property damage, personal and advertising injury, not financial losses from management decisions.
- D. Professional Liability covers errors or omissions in professional services, not the general management decisions of officers and directors.
Directors and Officers (D&O) Liability
Insurance that protects the personal assets of corporate directors and officers from claims arising from wrongful acts committed in their capacity as corporate managers.
- Protects personal assets of D&Os
- Covers wrongful acts in management capacity
- Often includes entity coverage for the corporation
Memory trick: D&O: Directors' Decisions, Officers' Obligations.