De-Mystifying D&O: A Primer for Texas Lawyers

01 July 2016 Publication

The Advocate

Although a multitude of liability insurance genres exist in today’s marketplace, Directors and Officers Liability Insurance (“D&O”) remains one of the least understood. A review of several common features of D&O may help explain its structure and provide a better understanding of its scope, purpose and coverage.

A Brief History
With the passage of the Securities Act of 1933 and the Securities Exchange Act of 1934, Lloyds of London began offering coverage to individual directors and officers who could face potential liability under the new statutes. Directors and officers perceived little risk, so few of these policies were sold.

The advent of state statutes in the 1960’s and 1970’s permitting corporations to indemnify directors and officers against fiduciary and management liabilities brought D&O policies to the forefront of the corporate insurance market. Today, nearly100% of public companies and between 75% and 80% of private companies purchase some form of D&O insurance.

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