Do Your Clients Understand their Directors & Officers Exposure? 

• By: Nancy Germond
• June 9, 2026

Directors and Officers (D&O) liability insurance has moved from a niche product purchased only by larger corporations and non-profits to a cornerstone of modern corporate risk management. For almost any organization that reports to a board of directors or forms an advisory committee, D&O liability insurance is essential in protecting not only their assets, but their board members’ personal assets.  

D&O claims are “surging to pre-pandemic levels,” warned Zywave based on data from Allianz. In this article we’ll discuss the current backdrop of the D&O market and the evolving risks your clients face. We will also highlight strategies you can take to help educate your clients to this need and protect yourself against allegations of “You never offered that coverage!” 

As a trusted advisor to your insureds, introducing this coverage is more critical than ever.  

Understanding the Current Landscape of D&O Insurance 

As rapidly as society and its risks change, the market for D&O insurance shifts. Here are some of the reasons the D&O market changes. 

• An increasingly litigious environment, such as the increase in nuclear verdicts 

• Bankruptcies  

• Carriers entering and exiting the D&O market 

• Cyber threats 

• Economic shifts such as recessions or high inflation rates 

• Employment practices exposures 

• Mergers & acquisitions  

• Regulatory changes, such as a new Presidential administration with new priorities 

• Shareholder activism 

These and other factors create intense pressure on corporate and non-profit leaders to act with caution, yet protect themselves with various risk management techniques, including the proper insurance.  

The Financial Impact of D&O Claims 

The costs associated with defending a D&O claim can be surprising. The average cost to settle a securities class action lawsuit runs into the millions, and even smaller, non-class action suits can easily reach six figures in legal fees, not to mention the additional cost to settle. Without adequate D&O insurance, the personal assets of directors and officers can be at risk, including their homes, savings and investments. This reality underscores the necessity of providing this important coverage. 

In the past two years according to Coalition’s 2022 Executive Risks Report, over one-third of small businesses with D&O liability coverage faced a claim. The average claim cost was over $120,000 and the highest claim went into the millions. Additionally from this report, 18% of businesses surveyed that bought employment practices liability (EPL) had a claim, as well, with an average cost just below $69,000. 

Without the right insurance, your clients’ boards and committees face serious threats to their business and to their personal assets. 

Those on smaller boards such as volunteer fire departments or small non-profits may think their homeowners’ coverage will defend them. The answer, as it often is in insurance, is “it depends.” Your clients who sit on boards or advisory committee should never rely solely on their homeowner’s coverage to respond.  

Strategies in Approaching Commercial Clients 

Those business owners leading small to mid-sized enterprises (SMEs) may mistakenly believe D&O insurance is only for large, publicly traded companies. This misconception will create a dangerous gap in their risk management strategy. As a trusted agent, your job is to build your insureds’ knowledge regarding D&O coverage with clear, compelling arguments and examples. Here are some ways you can approach your clients. 

1. Reframe the Conversation from Cost to Value 

Clients often focus on the premium cost without fully appreciating the value of the coverage. Shift the discussion from “Can you afford this premium?” to “Can you afford to be without this protection?”  

Use recent examples to illustrate the point. Explain that even one frivolous lawsuit could cost tens of thousands of dollars to defend. Compare this potential out-of-pocket expense to the annual D&O premium. By reframing the argument with an example of a recent case that aligns with your client’s corporate size, the client can view the policy not as an expense, but as a valued investment in personal financial security. 

2. Demystify the “Who” and “What” of D&O Risks 

Business owners may not realize the wide-ranging effects their daily decisions can expose them to. Use relatable examples regarding the specific risks relevant to their industry and company size.  

• For Startups: Discuss scenarios involving disgruntled investors who may litigate over a funding or product launch failure. Emphasize that procuring D&O coverage may be a requirement before venture capitalists invest. 

• For Family-Owned Businesses: Highlight potential conflicts among family members serving on the board, or their dislike of a non-family board member’s decision. Lawsuits can arise from disputes over succession planning, dividend distribution, or the company’s strategic direction. 

• For Non-Profits: Board members of non-profits, who often serve as volunteers, are also at risk. Suits can occur for mismanagement of funds, failure to uphold the organization’s mission, wrongful termination of an employee, or failure to thoroughly vet employees who later commit uncovered acts such as sexual misdeeds.  

If you tailor the example to their specific situation, you explain relatable threats and show the need for coverage. 

3. Use Real-World Scenarios and Case Studies 

Abstract discussions about risk never carry the weight of concrete stories. Share current examples, often found in trade journals and insurance magazines, of D&O claims that have affected businesses similar to your client’s. 

For instance, you could describe a scenario where a competitor sued a company for allegedly poaching key employees, leading to a lawsuit naming the directors personally. We often see these types of claims in our own industry. 

Alternatively, you could detail a case where a CEO was held liable for presenting a lender with misleading financial projections. These stories resonate more deeply than statistics and help clients envision themselves in similar situations. 

4. Emphasize That D&O Protects Personal Assets 

One of the most powerful arguments you can make is one that impacts personal finances. Many leaders operate under the incorrect assumption that the corporate veil or their LLC status completely protects their personal wealth. Correct this misunderstanding. Explain that while incorporation provides some protection, it often does not shield individuals from lawsuits alleging a breach of their duties as directors or officers. 

Explain that insurers design D&O insurance to protect the insured and its managers’ homes, assets, savings, retirement income and even children’s college funds. This personal connection can serve as the final push a client needs to recognize the importance of the coverage. 

5. Explain D&O as a Tool to Attract Top Talent 

In today’s competitive market, attracting and keeping top-tier executives and board talent is a major challenge. Experienced leaders are savvy about risk. I would think that most of your top talent will refuse to join a board or executive team unless the company provides adequate D&O insurance. 

Frame D&O coverage as a strategic asset for growth. By having it in place, your client demonstrates a commitment to good governance and protecting its leadership. This makes their organization a more attractive place for high-caliber professionals to work, giving them a competitive edge in the talent marketplace. 

Conclusion: Becoming a Trusted Advisor 

The D&O landscape is complex and filled with perils that can damage not only a company or non-profits’ assets, but its reputation.  

Ask your clients what trade magazines they read and review them online to stay current with their industry challenges. If you want to specialize in a niche, for example, non-profits, consider attending and joining one of their associations.  

If you stay informed about current trends and the specific pressures your clients face, you can move beyond a transactional relationship and become an indispensable risk management advisor.  

Your role is to educate, inform and guide your commercial clients toward making sound decisions. But when doing so, you also protect yourselves against those “failure to offer coverage” E&O claims that are so common today. 

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