Directors & Officers — Frequently Asked Questions

D&O insurance protects the personal assets of individuals serving in leadership and governance roles, including named partners, managing partners, executive committee members, board members of a professional corporation, and officers such as the managing director or chief operating officer. Coverage extends to their spouses and estates for claims arising from covered wrongful acts. The policy also reimburses the firm when it indemnifies these individuals, and entity coverage protects the firm itself against related claims.

LLCs benefit from D&O coverage because members and managers can face personal liability for alleged mismanagement, breach of fiduciary duty, or failure to comply with operating agreement obligations. Sole proprietors have less need since there are no co-owners to bring governance claims, but D&O may still respond to regulatory investigations or creditor claims alleging mismanagement. Multi-member LLCs and partnerships with complex profit-sharing arrangements are the structures most likely to generate the internal disputes D&O is designed to cover.

Malpractice insurance covers claims arising from the delivery of professional legal services to clients, such as missed deadlines, drafting errors, or bad legal advice. D&O insurance covers claims arising from management and governance decisions within the firm itself, such as disputes over partner compensation, allegations of financial mismanagement, failure to comply with regulations, or wrongful expulsion of a partner. The two policies protect against entirely different categories of risk and do not overlap in coverage.

Yes. Most D&O policies include coverage for defense costs associated with regulatory investigations, inquiries, and proceedings brought by government agencies against firm leadership. This can include state bar investigations into firm governance, IRS audits of partnership tax returns, Department of Labor investigations into employee benefit plan administration, and state attorney general inquiries. Some policies also cover the cost of responding to subpoenas and document production requests related to covered investigations.

Small to mid-size firms typically carry $1,000,000 to $3,000,000 in D&O limits. Larger firms with complex partnership structures, multiple offices, and significant revenue often maintain $5,000,000 to $10,000,000 or more. Retentions range from $10,000 to $50,000 per claim depending on firm size and claims history. Policies should include prior acts coverage dating back to the firm's formation to ensure that legacy governance decisions and partner agreements remain covered under the current policy.