Directors & Officers Liability insurance (D&O) is designed
to protect the personal assets
of an insured person (usually
past, present or future bank
directors, officers and employees).
Coverage is expanded to
include the holding company,
bank and subsidiaries as well.
The policy is intended to
provide coverage for losses/
claims arising from management
practices wrongful acts,
which include actual or alleged
errors or omissions, misleading
statements, misstatements,
breach of duty, and negligence
in performance of duties.
Below is a brief bird’s-eye
overview of the various
insuring agreement language
in a financial institution D&O
Liability policy:
Executive Liability –
Provides coverage for insured
persons regarding management
practices wrongful acts. This
insuring agreement is triggered
when the bank or holding company
is unable to indemnify the
insured person due to insolvency,
when prohibited by law,
or if the company is incapable
of indemnifying or decides not
to indemnify.
Company Reimbursement
– Provides coverage to
the company (bank, holding
company and subsidiaries)
when the company indemnifies
the insured persons for a
management practices wrongful
act claim. The majority of
D&O claims are covered under
this section of the policy.
Company/Bankers
Professional Liability –
Provides blanket coverage for
the professional services the
company or subsidiaries offers
its customers which include,
but are not limited to, insurance
sales liability, investment
representative liability, depositor
liability, non-electronic
banking privacy liability, and
administration of HSAs, IRAs
and Keogh accounts.
Lender Liability – Provides
coverage to the company
and insured person (if not covered
under Executive Liability
and Company Reimbursement)
for lending wrongful acts,
which can include the failure
or refusal to extend credit, denial
of credit, violation of consumer
lending law, wrongful
foreclosure, and servicing of
loans under a written contract.
Company Securities Liability
– Provides coverage
to the company and insured
person (if not covered under
Executive Liability and
Company Reimbursement) for
shareholder matters regarding
the sale of or purchase of
shares in the company.
Employment Practices
Liability – Provides coverage
to the insured person and
company for employmentrelated
matters which include,
but are not limited to, failure to
employ, wrongful termination,
coercion, demotion, reassignment,
discipline, defamation,
sexual harassment, humiliation
and discrimination.
Third Party Harassment
– Provides coverage to the
company and insured persons
for harassment claims brought
by individuals other than
bank employees. Harassment
includes, but is not limited to,
libel, slander, sexual harassment,
humiliation, discrimination
(other than lending), false
arrest, false imprisonment, etc.
Fiduciary Liability – Provides
coverage to company and
insured persons for fiduciary
wrongful acts which include,
but are not limited to, misstatement,
misleading statement,
error or omission or neglect,
breach of duty by the company
or an insured person serving
in their capacity as fiduciary
for any employee pension or
welfare benefit plans sponsored
by the company or for administering
such plans.
Trust Department
Liability – Provides coverage
to the company and insured
person for a trust department
wrongful act.
Directors & Officers
Liability policies are not
created equal; each carrier has
their own policy language.
A strong D&O policy is vital
in attracting and maintaining
qualified directors and officers.