In this article, an Orange County employment attorney sheds light on Sides A and B of Directors and Officers Liability insurance.

What D&O Covers
This kind of insurance protects the directors and officers of a company or corporation from losses sustained as a result of litigation brought against them for deliberate or inadvertent “wrongful acts.” Such acts are those that fall within their purview as officers or directors of the company. Whether or not reimbursement is permitted for deliberate acts depends on the jurisdiction.

Side A
Whether or not the company bears the responsibility of reimbursing directors and officers, they are covered under its terms because the insurance applies directly to them. This covers reimbursement for judgments, settlements and the expenses related to mounting a defense in a case of employment practices. Since there is not usually a deductible required, directors and officers can be spared from having to make any out-of-pocket payments for expenses incurred from claims for which they cannot obtain reimbursement from the business.

Side B
Side B coverage extends protection to the corporation as well as the directors and officers, a coverage that was lacking from Side A previously. Under Side B coverage, reimbursement can be made to the company itself. The responsibility or liability of a company for the “wrongful” actions of those employed therein, or respondeat superior liability, was not included under D&O coverage in the past. This was true even if the directors or officers granted permission for whatever “wrongful acts” were committed. The addition of “company reimbursement” was an outgrowth of the previous lack of protection against this liability. Therefore, since its inception, most employers have chosen to secure Side B coverage in order to obtain reimbursement for funds that they have had to pay as indemnification to officers and directors assuming that such reimbursement is permitted by law.

Call Your Orange County Employment Lawyer for Advice
The expertise, dedication and skill of your Orange County employment attorney will be invaluable to you in your employment case. Don’t hesitate to contact Reed Aljian LLP by calling 949-861-2524 today.