Directors’ and Officers’ Insurance protects the directors and officers of business or organization from liability based on their official actions. This insurance covers personal losses if they are sued due to their actions in their official capacity. It also covers legal and litigation costs.
Key components of D&O Insurance
D&O Insurance typically includes three types of coverage agreements, commonly referred to as Side A, Side B and Side C. Side A Coverage protects directors and officers for claims where the company refuses to or is financially unable to pay for indemnification. Side B Coverage covers when the company grants indemnification. And, Side C Coverage, also known as “entity coverage,” extends coverage to the corporate entity itself.
When does a Maryland business need it?
Any business with a corporate board or advisory committee should consider D&O Insurance, including public, private and non-profit organizations. Even smaller businesses with fewer assets may need this protection just as much as large corporations.
D&O Insurance
In Maryland, directors and officers of a corporation have four levels of protection from personal liability. The first level is following the applicable standards of conduct for directors and officers. The second level is exculpation from liability for money damages for state law claims by the corporation or a stockholder. The third level is indemnification for liability and expenses. And, finally, there are insurance policies that meet certain prescribed requirements and can provide immunity from personal liability.
Conclusion
D&O Insurance is a crucial aspect of risk management for any business. It provides a safety net for directors and officers that protects them from personal financial loss in the event of a lawsuit related to their official duties.
This insurance is an investment that can help ensure the stability and success of a business in Maryland. Having D&O Insurance in place is not just about compliance, but also about securing peace of mind for those in leadership positions and ensuring that the business can attract and retain top talent.