Q&A: D&O vs. General Liability

Q Our co-op has a question about our various insurance policies. Our insurance agent has recommended to the board that we keep our D&O coverage separate from our general liability coverage. I understand that some commercial general liability policies include D&O so is there a standard approach or policy for this type of scenario?

— Manhattan Board Member

A “In most cases, the Directors & Officers (D&O) liability should be written separate from the Commercial General Liability policy,” explains Edward J. Mackoul, president of Mackoul & Associates, Inc., an insurance provider in Long Beach, New York. “The reason being is that generally when the D&O is included with the General Liability, it will not provide as broad of coverage. For instance, a standalone D&O policy has a much broader definition of ‘who is an insured.’ It will generally include not only the entity, but any directors, trustees, officers, employees, committee members, volunteers, as well as persons who were or shall be elected. When coverage is included within the General Liability policy, coverage is limited to the current directors and officers, as well as all persons who are or will become directors. Generally, there will be no coverage for a director or officer who has exited the board and is named in a lawsuit for something that happened while they were on the board. This alone should be a reason to obtain a standalone or monoline D&O policy. But to take it a step further, when the D&O coverage is included within the General Liability policy, coverage would be excluded for any of the following: failure to maintain or obtain adequate insurance, discrimination, wrongful termination, non-monetary damage lawsuits, breach of contract and personal injury lawsuits such as libel, slander or defamation of character. In addition, coverage is usually not extended to cover the property management firm if the building has one. The standalone policies will not only provide a defense and penalties in most cases for all of the above situations, but it should also provide coverage for the management firm as well. This is critical, as generally the contract the building has with the management firm contains an indemnification clause. This indemnification clause will indicate that the building is responsible for any legal fees and penalties resulting from the management firm being named in a lawsuit along with the building or board. The standalone D&O policy is going to cost more, but when it comes to D&O insurance, you get what you pay for.”

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