Shareholders, employees and the general public have also increased their expectations concerning the conduct and integrity of corporate management. Directors are expected to act in good faith on all occasions and to apply conscientious care and best judgment. Ignorance is no excuse for nonfeasance. To meet these requirements, increasing numbers of corporations are turning to directors' and officers' liability insurance. It can also protect the corporation against potentially catastrophic indemnification loss for the cost of a relatively constant annual premium.
Coverage is provided for 'claims made' during the policy period.
Incidents that may later result in a claim are covered if reported during the policy period. The definition of loss usually covers the cost of defence which is included in the limit of liability. Most policies specifically exclude fines, penalties and damages that would be against public policy or interest to insure. To trigger coverage, a claim need only be made against the directors and officers during the policy period. A claim means any civil, criminal or written demand for monetary damage.