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Should we limit D & O coverage?

Your Legal Questions Answered

Should we limit D & O coverage?

Does it make logical/financial sense to acquire directors and officers insurance coverage only for select directors/officers?

No. Standard D & O policies automatically cover all officers and directors, and often cover volunteers and other individuals representing the organization. Policies today also usually cover the organization itself. You probably would not get much of a break on cost, if any, by excluding certain individuals or positions.
Since most plaintiffs’ lawyers look for every possible defendant when they file a complaint, it is likely that they would name one of the excluded individuals if they brought a claim against the organization and any of the people who run it. You would want to be able to defend those individuals with your insurance coverage.
You can’t predict where there might be a problem, and you probably can’t get reasonable insurance after the problem arises. Even though officers and directors are very unlikely to be personally liable, especially with limitation of liability and volunteer protection statutes protecting those who work for charities, they still need defense. (See Ready Reference Page: “Directors Often Fear Risks of Personal Liability.”) It would be unwise to try to limit your coverage.
Sunday, January 8, 2012

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