Behind the Boardroom Door: What D&O Insurance Actually Covers
Lawsuits against corporate leadership are on the rise. In 2024, 225 securities class action suits were filed in federal and state courts — up from 215 the year before. From shareholder actions to regulatory probes, business leaders are increasingly exposed to costly legal battles. In this litigious climate, directors and officers (D&O) insurance provides a critical safety net for directors, officers, and board members against allegations tied to decisions made in the boardroom.
What Is D&O Insurance?
So, what is D&O insurance? It’s a type of liability policy that steps in when board members or officers are accused of wrongful acts — things like misrepresentation, fiduciary breaches, or poor oversight.
Put simply, D&O insurance shields corporate leaders from personal financial loss if they’re sued for missteps in managing the business. It also covers the organization itself when it’s named in a lawsuit alongside its leadership.
Despite popular belief, this coverage isn’t just for Fortune 500 firms. Private businesses, nonprofit organizations, and startups are all at risk. Without it, directors’ and officers’ personal assets could be on the line.
What Does D&O Insurance Cover?
Here are a few of the most common situations where D&O insurance comes into play:
- Shareholder lawsuits over financial misstatements or poor management
- Breach of fiduciary duty, such as failing to act in the company’s best interest
- Regulatory investigations, which are increasingly common
- Claims of mismanagement or negligence, whether from investors, creditors, or employees
According to The Campbell Law Group, common fiduciary duty violations that lead to lawsuits include self-dealing, conflicts of interest, and failure to act in the best interest of the organization and its shareholders. Directors and officers must avoid exploiting company opportunities for personal gain and are expected to exercise reasonable business judgment. A breach of these duties can expose leaders to personal liability, even when the actions were not intentionally harmful.
Who Needs D&O Insurance?
If your business has a leadership team or a board, you need D&O insurance. Here’s why:
- Private companies face claims from employees, vendors, and creditors.
- Nonprofits often deal with volunteer boards, but that doesn’t shield members from liability.
- Startups attract outside investment, and where there’s capital, there’s risk.
Without coverage, your business and leadership could bear the full financial brunt of a claim.
How Oakwood Helps Protect Your Leadership
At Oakwood Risk, we specialize in helping leaders navigate liability with confidence. Our personalized approach means we assess your unique exposures and tailor a policy that protects both your company and its decision-makers.
Don’t wait for a lawsuit to find out your leadership is underinsured. Contact us today to learn how Oakwood can help you secure reliable protection with D&O insurance that works when you need it most.
Oakwood
Oakwood Risk provides industry-leading insurance services, solutions, and counsel to our clients. Our professionals are valued for their ability to provide outstanding customer service, with a commitment to the relentless pursuit of value-added solutions, results, and comprehensive coverage.
