D&O insurance: Get directors and officers liability insurance

A deductible for a D&O policy isn't as straightforward as some other forms of insurance, but the answer is yes there can be a deductible on parts of the policy.

As we previously established, a directors and officers policy is broken down into 3 sides - A, B and C. Typically a deductible is not applied to side A, but side B and C both have a deductible. This means the policyholder agrees to reimburse the insurance company when filing a claim that falls under either side B or C coverages. The reimbursed payment is a predetermined amount that the policyholder agrees to when purchasing the policy.

The policyholder can determine how much or how little they wish to pay (within a set range) during the purchasing of a policy. The amount the policyholder agrees to pay will impact the price of the policy. The higher the deductible the cheaper the insurance premium. This decision should be based on what the policyholder believes they can reasonably payout if they ever had to file a claim.

You should still consider purchasing a D&O policy for a nonprofit business because nonprofits are not free of risk from legal battles. For instance, a director could mismanage your NPO’s government funds, breaching their fiduciary duties and cause an expensive lawsuit. Having directors and officers insurance can protect nonprofit organizations, similar to any private or public business. 

Errors and omissions (E&O), or professional liability insurance, protects your business employees if they’re held liable for the results of their actions or advice. For example, if a technology consultant helped create an app that didn’t perform as well as expected, professional liability insurance can help pay for any legal fees and damages. 

On the other hand, directors and officers liability insurance (D&O) specifically protects the high-ranking employees in organizations in the event they’re held personally liable (or along with the business) for their actions, including negligence and mismanagement. D&O can be seen as a form of professional liability insurance. 

D&O insurance policies typically don’t cover claims of criminal, fraudulent, or intentional non-compliant acts. Additionally, cases for bodily injury and property damage are not covered under D&O insurance. For that, you need a commercial general liability policy.

Yes, most insurers extend their D&O cover to protect former directors and officers. So if a director left your company a few months ago, but a lawsuit against their past actions recently came to light, your business insurance should continue to pay for the damages and fees involved. 

In general, most policies will cover a break of fiduciary duty claim. The coverage would extend to legal fees, settlement payments, court judgements and and other financial losses.

The policy alone is not tax deductible is not applicable for this insurance. The premiums paid by the insured company on behalf of their directors and officers can be shown as expenses of the company and the GST amount can be claimed.