D&O insurance may help cover costs related to directors and officers being sued. Examples of reasons for such lawsuits include the following:
Fraud
Lack of corporate governance
Failure to comply with workplace laws
Theft of intellectual property
Poaching competitor clients
Misuse of company funds
Misrepresentation of company assets
Breach of fiduciary duty, leading to financial losses or bankruptcy
Deliberate illegal acts are not usually covered by D&O insurance. Therefore, if a director is found guilty of charges such as intentional misrepresentation or embezzlement, their D&O policy may not cover the lawsuit’s legal fees or other related costs.