Directors & Officers Insurance: Why Even Small and Private Companies Need It

Directors and officers (D&O) insurance protects the personal assets of a company's leadership, and often the company itself, against claims alleging a wrongful act in managing the business: a breach of fiduciary duty, mismanagement, or a decision that harmed shareholders, employees, creditors, or other stakeholders.

At private and small companies, the common triggers aren't securities lawsuits, they're employment-related claims, disputes among co-founders or investors, allegations of misrepresentation during a fundraising round or a company sale, and creditor claims if the company becomes insolvent.

Company size doesn't make these exposures go away. A lawsuit doesn't require a public shareholder base, a disgruntled minority investor, a departing co-founder, or a regulator can name individual directors and officers personally, putting personal assets, not just company assets, at risk without D&O coverage in place.

D&O policies are typically structured around three insuring agreements worth knowing by name: Side A protects individual directors and officers when the company can't indemnify them, for example in insolvency; Side B reimburses the company when it does indemnify its directors and officers; and Side C provides entity-level coverage for the company itself, usually limited to securities-related claims.

Machaen Insurance Agency places D&O coverage for private companies and nonprofits sized to the actual exposure those businesses face, not the inflated version people tend to associate with Fortune 500 boardrooms.

Frequently Asked Questions