Macario Insurance Group provides comprehensive Directors and Officers (D&O) Insurance solutions, protecting the personal wealth of your company’s leadership against legal actions arising from their management decisions.

D&O coverage is a critical element of corporate governance, essential for attracting and retaining qualified executives and board members. We offer tailored policies across numerous states, including California, New York, Texas, Florida, Arizona, Georgia, and Washington, among others.

What is Directors and Officers (D&O) Insurance?

D&O Insurance is a specialized liability policy designed to protect both the personal assets of directors and officers and to reimburse the company for expenses incurred in defending them. This coverage responds to claims of "wrongful acts" in management, such as:

  • Breach of Fiduciary Duty: Failure to act in the best financial interest of the company or its shareholders.
  • Mismanagement: Errors that result in financial loss, such as in mergers or acquisitions.
  • Misrepresentation: Inaccurate reporting or failure to disclose material facts.

D&O coverage is typically structured into three Insuring Agreements (or "Sides"):

  1. Side A (Individual Coverage): Protects the personal assets of the individuals when the company cannot (e.g., in bankruptcy).
  2. Side B (Corporate Reimbursement): Reimburses the company for defense costs it pays on behalf of its insured leaders.
  3. Side C (Securities Entity Coverage): Exclusively for public companies, this protects the corporate balance sheet against securities claims.

D&O Risk Comparison: Public vs. Private Companies

The need for D&O insurance is universal, but the sources of claims differ significantly based on the company's structure.

Publicly Traded Companies (Securities Risks)

Public company D&O is arguably the most complex and expensive form of the coverage. The primary exposure comes from securities class action lawsuits filed by shareholders.

  • Primary Claims: Lawsuits alleging violations of securities laws (like the Securities Exchange Act) related to initial public offerings (IPOs), secondary offerings, earnings misstatements, or inaccurate forecasts.
  • Key Coverage Feature: Side C (Securities Entity Coverage), which covers the corporate entity itself for securities-related claims.
  • Highest Risk Periods: Around significant financial events, such as earning restatements, stock drops, or failed acquisitions.

Private Companies (Operational Risks)

Private companies typically do not face securities class actions, but their D&O risk is still substantial, primarily stemming from operational, employment, and contractual disputes.

  • Primary Claims: Suits filed by competitors, customers, vendors, lenders, or employees.
  • Key Coverage Feature: Protection against mismanagement claims during high-growth stages, capital raises, or when facing insolvency.
  • Common Lawsuits: Suits from terminated employees (sometimes bundled with Employment Practices Liability Insurance - EPLI), breach of contract disputes with major vendors, and allegations of unfair business practices.

Non-Profit Organizations (Fiduciary Duty)

Non-profits are exposed when board members are accused of failing to follow the organization's mission or properly manage donor funds.

  • Primary Claims: Donor lawsuits over the misuse of restricted funds, failure to maintain appropriate regulatory standards, or allegations of financial mismanagement.

D&O vs. Other Core Business Insurance

It is critical to understand that D&O is not a catch-all policy; it protects management decisions, not operations:

Policy Type Who is Protected What is Covered What is NOT Covered
D&O Insurance Directors, Officers, Board Members, Entity Financial losses resulting from management decisions (mismanagement, breach of fiduciary duty). Professional errors (E&O) or physical injury/property damage (GL).
Errors & Omissions (E&O) The Company & Employees Financial losses resulting from professional service failures, mistakes, or negligent advice (e.g., a consultant's bad advice). The executive management's strategic errors (D&O).
General Liability (GL) The Company Claims for bodily injury or property damage caused by accidents on business premises or operations. Financial loss from bad advice or poor management.

Frequently Asked Questions (FAQ)

What factors determine the cost of a D&O policy?

Premiums are determined by the company's annual revenue, financial stability, claims history, industry sector, the presence of an audit committee, and—for private companies—the amount of external funding (VC or PE) received.

How are D&O policy limits determined?

For public companies, limits are often set based on the company's market capitalization and industry benchmarks. For private companies, limits typically range from $1,000,000 to $5,000,000, but can be higher depending on the company's risk exposure and major contractual requirements.

Does D&O Insurance include EPLI?

D&O policies for private companies can often include EPLI (Employment Practices Liability Insurance) as a bundled, discounted coverage. For public companies, EPLI is almost always purchased as a separate, stand-alone policy due to the high severity of risk.

The Macario Insurance Group, LLC Difference

We are an independent broker working with dozens of A-rated carriers, ensuring we find the D&O policy that best matches your company's risk profile and budget, whether you are preparing for an IPO or running a family-owned private business.

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  • We use only large, reputable carriers with an A.M. Best rating of A or higher.