Directors and Officers insurance works by reimbursing directors and other employees in Managment for the legal fees and settlements, as well as other costs if a director or officer is personally sued for reasons such as failure to comply with workplace laws, misrepresentation of company assets, inadequate disclosure, reporting errors, and other things.

The process of the insurance is simple. After a manager is accused of not performing their role satisfactorily and the person accused and legal management is informed, a description of the claim is given to the insurer. If the claim is covered, then the insurer covers defense costs.

There are three types of Directors and Officers insurance.

• A-side coverage covers directors, officers, and occasionally employees for defense costs, settlement fees, or judgments if the company refuses or cannot financially cover them.
• B-side coverage covers directors, officers, and employees’ losses when the company does indemnify them, for this kind of coverage the company is reimbursed, not the director.
• C-side coverage, also called entity coverage covers the company for legal and claims settlement costs while the company defends its corporate actions.

The benefits of having Directors and Officers insurance are many such as protection for a company’s directors, helping a company maintain a positive reputation because of the protection a company offers its employees, which will, in turn, help a company attract new directors, allowing peace of mind for employees as well as company owners, and legal cost reimbursement.