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Directors and Officers Insurance in Massachusetts

What is Directors and Officers Insurance?

The people who lead businesses and nonprofit organizations in Massachusetts have a great deal of influence over the businesses and organizations they’re involved with. Because they have a lot more influence than a typical employee, they’re often held to higher standards than most employees. If they make a bad decision or take an inappropriate action, they might be held personally responsible for any consequences of their decision or action. Directors and officers insurance gives leaders a way to protect themselves from the risks they assume when making tough decisions about the businesses and nonprofits they oversee. 

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Directors and officers insurance is a specialized type of professional liability insurance. It protects leaders of businesses and nonprofit organizations from a variety of risks that are inherent in their leadership roles. Some examples of issues that a policy might provide coverage for include:

  • Conflicts of interest
  • Bad investment decisions
  • Problems related to personnel decisions
  • Inappropriate releases of confidential or personal information
  • Gross negligence
  • Unlawful acts
  • Other errors that leaders might make

While a policy may cover conflicts of interest, gross negligence and unlawful acts, a policy doesn’t grant a leader permission to commit these. It may offer financial help for such issues, but a policy usually won’t provide protection from other potential consequences.

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Who in Massachusetts Can Benefit from Directors and Officers Liability Insurance?

Most people who lead a business or nonprofit organization in Massachusetts can benefit from the protections that directors and officers liability insurance offers. A C-level executive of an international corporation based in Boston, MA and a board member of a local nonprofit in Springfield, MA may lead vastly different organizations. They both are exposed to the risks that come with leadership, however, and can likely benefit from the protections that this type of insurance provides.

Who Pays for Directors and Officers Insurance?

Businesses and nonprofit organizations in Massachusetts often purchase directors and officers liability insurance policies for their leaders. Even though policies offer personal protection for leaders, the risks that policies guard against are related to the work leaders do for businesses or nonprofits. Since leaders wouldn’t be exposed to these risks if they weren't’ involved with the organizations they serve, the organizations frequently pay for leaders’ policies.

How Much Directors and Officers Coverage Should Organizations Purchase?

Determining how much directors and officers coverage to purchase is a significant decision, and it’s one that should take into account several factors. When considering how much coverage to purchase for a leader, businesses and nonprofits should consider:

  • How much risk the leader is exposed to
  • How much a covered issue might cost to resolve
  • What other resources an organization has to help leaders (e.g. lawyers kept on retainers)
  • Other factors that may affect a claim

A business or nonprofit organization that isn’t sure how much coverage to purchase may want to consult with both a lawyer and an insurance agent. A lawyer can help determine the level of risk exposure, calculate the potential cost of an issue and recommend supplemental resources that might be used if an issue arises. Once these have been determined, an insurance agent can help find an affordable directors and officers policy that provides the right amount of coverage for an organization.

Organizations that don’t already have relationships with a lawyer and an independent insurance agent should contact a Roger Butler Insurance agent. Our independent insurance agents have helped many businesses and nonprofit organizations assess their risk exposure and find insurance solutions that meet their needs. Once an organization’s and its leaders’ risk exposures have been considered, our agents can help the organization get quotes for many different types of insurance, including directors and officers insurance.

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