If you serve as a Director or Officer of a board, you should be sure you have Directors and Officers Liability Insurance (often called D&O). This insurance is meant to reimburse you for losses or defense costs in the event you are sued for alleged wrongdoings in your capacity as a director or officer. Examples of such wrongdoings are: breach of duties and contracts, mix of personal and business assets, and failure to disclose conflicts of interest. Claims under this insurance typically arise when the corporation faces financial difficulties, leading to shareholder discontent. Even innocent errors in judgment by executives may precipitate claims. Typical sources of claims include shareholders, customers, regulators, and competitors.
Usually, the company itself purchases D&O insurance as a means of attracting and retaining directors; however, this should not be assumed.