Directors and officers liability insurance

Directors and officers liability Insurance (often called 'D&O') is liability insurance payable to the directors and officers of a company, or to the organization(s) itself, as indemnification (reimbursement) for losses or advancement of defense costs in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers. Such coverage can extend to defense costs arising out of criminal and regulatory investigations/trials as well; in fact, often civil and criminal actions are brought against directors/officers simultaneously. Intentional illegal acts, however, are typically not covered under D&O policies.The insurance is closely related to corporate governance, corporations law, and the fiduciary duty owed to shareholders or other beneficiaries. Under the United States business judgment rule, the directors and officers are granted broad discretion in their business activities. In the United States, corporate law is typically at the state level; corporations are often domiciled in Delaware (with one estimate at 97% of corporations domiciled in either their home state or Delaware), due to its developed corporate law and tax benefits; Publicly traded companies are subject to more federal claims, particularly due to the Securities Act of 1933 and the Securities Exchange Act of 1934.Under the 'traditional' D&O policy applied to 'public companies' (those having securities trading under national securities exchanges etc.), there are three (3) insuring clauses. These insuring clauses are termed: Side-A or 'non-indemnified'; Side-B; or 'indemnified'; and Side-C; 'entity securities coverage'. D&O policies may also provide an additional Side-D clause, which provides for a sublimit for investigative costs coverage related to a shareholder derivative demand. In detail, the coverage clauses provide the following:Directors and officers insurance is provided so that competent professionals can serve as supervisors of organizations without fear of personal financial loss. Directors are typically not managing the day-to-day operations of the organization and therefore cannot ensure that the organization will be successful; further, business is inherently risky. Thus the business judgment rule has developed to shield directors in most instances.In the United States, total direct premiums written amounted to about $2.9b from 2013 to 2014, with American International Group as the market leader with 16% market share.