Directors & Officers Insurance (D&O)

Directors and officers insurance, commonly called D&O, steps in when a lawsuit targets an individual board member personally, rather than the organization itself. Wealthy individuals are frequently invited to join corporate, nonprofit, or private-company boards, and that service can expose them to claims alleging mismanagement, breach of fiduciary duty, or misleading disclosures. Without adequate coverage, a board member's personal assets could be at risk.

Consider a hypothetical family patriarch who joins the board of a private manufacturing company. If a minority shareholder later sues alleging the board approved a transaction that harmed their interests, the patriarch could face personal legal costs even if no wrongdoing occurred. D&O coverage is designed to pay defense costs and, in some cases, settlements or judgments arising from such claims.

A common confusion is assuming the organization's own D&O policy fully protects individual directors. That policy may have gaps, sublimits, or conflicts of interest between the entity and the individual. Many families serving on multiple boards evaluate whether each entity's policy is sufficient or whether a personal umbrella or standalone D&O policy should supplement it. A qualified insurance professional and attorney should review any board member's specific exposure. Families dealing with growing complexity may find this relevant reading at complexity, not net worth.