Why do corporate attorneys need directors and officers insurance?

Professional liability insurance and directors and officers insurance protect against fundamentally different risks. Your malpractice policy covers claims arising from the delivery of legal services to clients. When you serve on a board of directors, you are acting as a fiduciary of the organization, not as its attorney, and your malpractice policy will not respond to claims arising from that board service.

Corporate attorneys are frequently invited to serve on boards of client companies, industry organizations, bar associations, and nonprofit entities. While this involvement is professionally rewarding, it creates personal liability exposure for breach of fiduciary duty, mismanagement, regulatory violations, and employment practices claims brought against the board.

The financial exposure from board service can be substantial. Shareholder derivative suits against directors of even small companies regularly produce settlements in the $500,000 to $5 million range. Nonprofit board members can face personal liability for tax compliance failures, misuse of charitable assets, and employment decisions. Without D&O coverage, these claims threaten your personal assets.

For law firm partners, the firm itself may need D&O coverage if it is organized as a corporation or LLC with a formal board or management committee. Claims from departing partners alleging mismanagement, improper profit distributions, or breach of fiduciary duty are increasingly common and fall outside the scope of malpractice insurance.

D&O policies for individual attorneys serving on outside boards typically cost $1,500 to $5,000 annually for $1 million in limits, though costs vary significantly based on the organization's size, industry, and financial condition. Many organizations provide D&O coverage for their board members, but you should always verify the existence, limits, and terms of that coverage before accepting a board position.

If the organization's D&O policy has a retention or deductible that applies to individual directors, consider whether you need personal D&O coverage to fill that gap. Some carriers offer Side A coverage specifically designed to protect individual directors when the organization cannot or will not indemnify them.