What Is Directors And Officers Liability Insurance?

A common practice amongst professionals, especially attorneys, is the acceptance of board positions on for-profit and not-for-profit entities. And although most of the time the decision to accept these positions is done with all good intentions, it doesn’t mean that there is no exposure related to the acceptance of those positions. 

If you’re an attorney, or if you’re any professional, and you’re sitting on a board now or you’re contemplating the acceptance of a board position, I think there’s a couple of things you need to do. 

First off, you need to go to that organization and ask them if they have a separate directors and officers policy. If they do, great! Ask them for a copy of that. That way, you can put it in your file, and you’ll know you know the limits that they have to cover you, the deductible if there is any deductible and it’s applicable to you and the policy period so you know when it expires, and when it needs to be renewed. 

If the organization comes back to you and says no, that they don’t have a separate D&O policy, I think you need to ask them if they would consider or have they ever considered purchasing a D&O policy. And this is not just for you, the person asking the question. You’re asking for all of the other directors and officers, the employees of the organization, and even sometimes the volunteers of that organization. It’s something that they really need to consider and look at. Secondly, you need to contact your legal malpractice insurance company. 

Now, how does accepting a board position affect your coverage? Most policies actually exclude your acts as an officer or director of an outside organization. There is also an ownership interest in most policies that state that if you have any type of ownership, or even if you just own, manage or control an outside entity, your professional services that you provide to them are excluded under the policy. 

So there are definitely exposures that can and do arise when you accept a position on a board, be it not-for-profit or for-profit. 

My comments are not intended to stop you from accepting any position on any board. My comments here are merely to ask you to take a step back before you accept, ask a couple questions, and make sure you know the exposure that you’re accepting by accepting the board position.