Every decision a director or officer makes on behalf of a company carries personal risk. If shareholders, employees, regulators, or competitors believe those decisions caused harm — financially, legally, or otherwise — they can sue the individuals responsible, not just the company. And when that happens, the personal assets of the directors and officers themselves are on the line.

That’s exactly what directors and officers insurance is designed to prevent. Here’s a complete guide to what D&O insurance is, what it covers, who needs it, and how to make sure your leadership team is properly protected.

What Is Directors and Officers Insurance?

Directors and officers insurance — commonly called D&O insurance — is a liability policy that protects the personal assets of a company’s directors, officers, and other senior leaders when they’re sued for alleged wrongful acts committed in their management roles.

“Wrongful acts” in this context doesn’t mean criminal behavior. It means decisions, actions, or omissions made in the course of managing the organization that a third party claims were negligent, misleading, in breach of fiduciary duty, or otherwise harmful. D&O insurance covers the cost of defending against those claims and paying any resulting settlements or judgments.

Without D&O coverage, directors and officers facing a lawsuit must pay legal defense costs and any damages out of their own pockets — even if the lawsuit is ultimately meritless.

What Does Directors and Officers Insurance Cover?

A standard D&O policy is typically structured in three parts:

Side A — Personal protection for individual directors and officers. Covers the personal assets of directors and officers when the company cannot or will not indemnify them — for example, when the company is insolvent or when indemnification is prohibited by law.

Side B — Reimbursement to the company. When the company does indemnify its directors and officers, Side B reimburses the company for those indemnification payments.

Side C — Entity coverage. Covers the company itself for securities claims made against the organization, not just its individual leaders. This is primarily relevant for publicly traded companies.

Across all three sides, D&O insurance typically covers:

• Legal defense costs — attorney fees, court costs, expert witnesses
• Settlements and judgments
• Regulatory investigation costs
• Crisis management and PR expenses (in some policies)

What Does D&O Insurance NOT Cover?

Understanding the exclusions is just as important as understanding the coverage. Most D&O policies do not cover:

• Fraud or criminal acts — intentional illegal conduct is excluded, though defense costs may be covered until fraud is proven
• Bodily injury or property damage — those are covered by general liability, not D&O
• Prior known claims — claims that were known before the policy inception date
• Personal profit gained illegally — gains from transactions the insured wasn’t legally entitled to make

Who Can Sue Directors and Officers?

The list of potential claimants is longer than most business leaders realize:

Shareholders and investors — alleging mismanagement, misleading financial disclosures, or decisions that destroyed shareholder value

Employees — claiming wrongful termination, discrimination, harassment, or failure to manage a pension fund properly

Customers and creditors — alleging breach of contract or misrepresentation

Regulatory agencies — the SEC, IRS, OSHA, state attorneys general, and others can all take legal action against individual officers and directors

Competitors — alleging antitrust violations, unfair business practices, or intellectual property infringement

Other companies — in merger and acquisition scenarios, claims from the acquired or acquiring company’s stakeholders are common

Who Needs Directors and Officers Insurance?

D&O insurance is not just for Fortune 500 companies. Any organization with a board of directors, executive leadership, or management structure that makes decisions on behalf of others should consider D&O coverage. That includes:

For-profit businesses of all sizes — Closely held private companies, family businesses, startups, and mid-sized businesses all face D&O exposure. Shareholders, employees, and creditors can sue leadership regardless of company size.

Nonprofit organizations — Board members of nonprofits are frequently targeted in D&O claims — by donors alleging misuse of funds, employees alleging wrongful termination, or regulatory agencies investigating compliance failures. Many nonprofit board members don’t realize their personal assets are at risk without D&O coverage in place.

Startups and venture-backed companies — Investors often require D&O insurance as a condition of funding, and the rapid decision-making environment of a startup creates significant exposure.

Companies with outside board members — Attracting qualified independent directors is nearly impossible without D&O coverage. Experienced board members won’t accept personal liability without it.

Companies considering going public, merging, or being acquired — M&A transactions dramatically increase D&O exposure, as shareholders on both sides may file claims related to the deal terms.

How Much Does Directors and Officers Insurance Cost?

D&O premiums vary widely based on company size, industry, revenue, claims history, corporate governance practices, and coverage limits. For small to mid-sized private companies, premiums typically range from $5,000 to $50,000 per year, according to industry data. Publicly traded companies, companies in highly regulated industries, or those with prior claims history pay significantly more.

Several factors can help reduce your premium:

• Strong corporate governance practices and documented decision-making processes
• A clean claims history
• Experienced, independent board members
• Robust internal controls and compliance programs
• Transparency in financial reporting

D&O Insurance for Tulsa and Oklahoma Businesses

For business leaders in Tulsa, Oklahoma City, and across the state, D&O claims are a real and growing risk. Oklahoma’s business community spans energy, healthcare, aerospace, financial services, and professional services — all industries with significant regulatory exposure and complex stakeholder relationships. A single lawsuit against a director or officer — even one that’s eventually dismissed — can cost hundreds of thousands of dollars in legal fees.

Rich & Cartmill has been helping Oklahoma business leaders understand and obtain directors and officers insurance since 1922. Our team works with for-profit companies, nonprofits, startups, and established businesses across the region to build D&O programs that fit their structure and risk profile.

Frequently Asked Questions About Directors and Officers Insurance

Does a small private company really need D&O insurance? Yes. Private companies face many of the same D&O risks as public companies — shareholders, employees, creditors, and regulators can all sue directors and officers regardless of company size. Without coverage, leadership’s personal assets are exposed.

Is D&O insurance required by law? It’s not legally mandated in most jurisdictions. However, many investors, lenders, and corporate bylaws require it. And practically speaking, most experienced executives and board members won’t serve without it.

Does D&O cover the company or just the individuals? Both, depending on the policy structure. Side A covers individuals personally. Side B reimburses the company when it indemnifies its officers. Side C covers the entity itself for securities-related claims.

What’s the difference between D&O insurance and E&O insurance? Errors and omissions (E&O) insurance, also called professional liability, covers claims arising from professional services provided to clients. D&O insurance covers claims against management for how the company is run. Many businesses need both.

How do I know how much D&O coverage my company needs? Your coverage limits should reflect the scale of decisions being made, the complexity of your stakeholder relationships, your industry’s regulatory environment, and the personal assets of your directors and officers. An experienced insurance advisor can help you model appropriate limits.

Protect Your Leadership Team With Rich & Cartmill

Directors and officers insurance is one of the most important — and most underutilized — protections available to business leadership. Rich & Cartmill’s team helps businesses across Oklahoma, Kansas, and Missouri evaluate their D&O exposure and secure coverage that genuinely protects the people making the decisions.

Contact Rich & Cartmill today to learn more about directors and officers insurance or get a quote for your organization.

Author: Ryan Teubner, VP | Rich & Cartmill Insurance