What Is D&O Insurance?
Directors and Officers insurance protects the personal assets of law firm partners, managing directors, and other leadership when they face claims alleging wrongful acts in their management capacity. Unlike malpractice insurance that covers legal services, D&O addresses claims arising from business decisions.
Partners can be personally sued for employment decisions, financial management, breach of fiduciary duty to the firm, and regulatory violations. Without D&O coverage, partners may need to defend these claims using personal assets, putting homes, savings, and retirement funds at risk.
PSL Insurance Group provides D&O policies structured for law firm governance, recognizing the unique partnership dynamics and regulatory environment attorneys operate within.
What D&O Insurance Covers
A comprehensive D&O policy for law firms typically includes three coverage parts:
Side A Coverage: Direct protection for partners when the firm cannot indemnify them, such as during bankruptcy or when indemnification is legally prohibited.
Side B Coverage: Reimburses the firm when it indemnifies partners for covered claims, preserving firm capital.
Side C Coverage: Entity coverage protecting the firm itself from securities claims and certain regulatory actions.
Additional coverage extensions may include employment practices claims, fiduciary liability, and coverage for outside board positions held by partners.
Who Needs D&O Coverage?
Every law firm with multiple partners or a formal management structure should consider D&O insurance. Claims can arise from:
- Employment Decisions: Wrongful termination, discrimination, or harassment claims against firm leadership
- Financial Management: Partner disputes over compensation, capital calls, or firm investments
- Regulatory Actions: Bar investigations into firm management practices
- Lateral Hiring: Claims from former firms alleging improper partner recruitment
Even well-managed firms face allegations. D&O insurance ensures leadership can make difficult decisions without fear of personal financial ruin.
