Directors and Officers Insurance in Texas

What is directors and officers insurance? 

Anyone who holds a senior leadership position within a Texas organization shoulders a significant amount of responsibility, and there’s some risk that comes with that responsibility. Not only could senior leaders face professional consequences for any bad decisions they make, but they might also face personal financial liability in certain situations. Directors and officers insurance may help protect leaders of organizations from this type of risk.

Directors and officers insurance provides liability coverage for senior leaders of organizations. Should a leader be held personally liable for a bad action or decision, this might provide coverage.

Who in Texas gets D&O insurance?

D&O insurance is purchased by various types of senior leaders. Most people who make high-level decisions for businesses or nonprofits should consider coverage. For example, it’s frequently purchased by:

• C-Suite executives
• Presidents, vice presidents and directors
• Board chairs and members
• Trustees and treasurers
• Other people in leadership positions

An insurance agent specializing in D&O can help leaders and organizations determine whether this insurance makes sense for their situation.

What types of claims are covered by D&O insurance? 

D&O insurance is designed to handle a variety of situations where a senior leader might be held liable for a decision or action that was detrimental to their organization. Some claims that a policy may cover are those arising from:

• Misleading statements
• Misrepresentations
• Breaches of corporate regulations or laws
• Decisions that cause bankruptcy
• Misuse of the organization’s funds
• Lack of corporate governance

While many decisions and actions are typically covered, intentional misconduct or clear illegal activities usually aren’t protected.

Can D&O insurance cover fiduciary breaches? 

D&O policies may extend coverage to fiduciary breaches, but whether these are covered by a specific policy depends on that policy’s terms. A knowledgeable insurance agent can help fiduciaries find a policy that’ll cover them for alleged breaches of their responsibilities.

What are Side A, Side B and Side C coverages? 

D&O policies frequently have parts that are referred to as Side A, Side B and Side C:

• Side A: Normally a form of personal liability coverage for the leader, in the event that their organization can’t or won’t pay legal fees and settlements. For instance. Side A might cover costs if the organization is unable to due to bankruptcy or insolvency.
• Side B: Normally liability coverage for the organization, potentially paying legal fees and settlements that the organization owes because of a senior leader’s actions.
• Side C: Normally for securities of publicly traded companies, but might be used by private organizations if entity coverage is required.

What expenses are typically covered by D&O policies? 

When there’s a covered claim, D&O policies generally help by covering attorney fees, court fees and settlements. Assistance usually begins when the covered claim is filed. 

How is the cost of D&O insurance determined? 

D&O premiums are based on many factors, and premiums therefore vary. Some of the details that can impact cost are the:

• Insured’s position within their organization
• Organization’s industry, and size
• Organization’s financial position
• Chosen Sides and coverages
• Organization’s recent claims (if applicable)

An independent insurance agent can help leaders and organizations find out how much they’ll pay for coverage. It’s easy to compare coverages and costs with an independent agent, because they’re able to get custom quotes from several insurance companies in the state.

Who typically pays for D&O coverage? 

The onus of D&O premiums typically falls to the organization. Although the individual leader also benefits from having protection, they only need the protection because of their responsibility to the organization. Thus, the business or nonprofit usually pays the premiums.