D&O Coverage: Who Needs It and Why

Fear over potential lawsuits can make it difficult for officers, board members, and advisory teams to confidently conduct their duties without fear of asset loss from potential liability. D&O policies cover your organization and its management in the face of financial penalties as a result of a lawsuit, freeing them to make necessary operating decisions. 

What is Directors and Officers Liability Insurance?

Commonly known as D&O insurance, directors and officers liability insurance protects individuals from personal financial loss in the event they are sued as a result of being part of a company’s leadership. These policies can also cover legal fees and other similar costs stemming from the lawsuit. 

D&O insurance offers the financial backing for standard indemnification provisions, under which officers are not held liable for losses due to their role operating within the company. There are three types of insurance coverage agreements linked to D&O coverage: Side A, Side B, and Side C.

• Side A coverage: These policies insure directors and officers against claims where the company refuses to or is financially unable to pay for indemnification. 
• Side B coverage: The company is insured while its corporate assets are at risk. This covers the losses of directors and officers when the company does grant indemnification. 
• Side C coverage: The company itself and its assets are insured against risk. 

The type of coverage you purchase will depend on the needs of your company. Reach out to your insurance provider to discuss the ideal coverage, including D&O coverage, for your business. 

Who Needs D&O Coverage? And Why You Need It.

D&O insurance covers anyone serving as a director or officer for a for-profit business or a non-profit organization. D&O policies are generally purchased by businesses to cover a group of individual employees, rather than by the employees themselves. 

Lawsuits against your company’s leadership can originate from customers, employees, vendors, competitors, investors, or other sources for alleged infractions while managing a company. D&O insurance claims are paid to individuals for losses or reimbursement of legal costs if civil action is brought against them. Depending on the policy, this coverage may also extend to defense costs in the event of criminal or regulatory investigations. 

Policies with D&O coverage are mostly purchased by large, publicly traded companies, and many small businesses and non-profit organizations think they don’t need this coverage. However, because they don’t have the ability to fund a costly defense, small businesses may be at more risk of losses from a damaging lawsuit. 

Getting Coverage You Can Trust

D&O policies can take several different forms, depending on the nature of your business and the risks it faces. To get the right coverage, it is recommended that you only work with an insurance company with extensive experience in the specialized cannabis field. 

CannGen works specifically with cannabis and hemp businesses to ensure they are fully covered against the unique risks raised by their industries. Director and officer coverage is now available with CannGen. Contact CannGen with questions or to find out how to add D&O coverage to your policy: https://www.canngenins.com/contact-us/ 

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Disclaimer: Information shared is for general purposes only.