Insurance Curator Directors and Officers (D&O) liability insurance protects corporate leaders from personal losses in claims alleging wrongful acts in their managerial capacity. Employment-related claims are a major portion of litigation risk for companies in the United States, and whether these claims sit inside a D&O policy — or instead belong to Employment Practices Liability Insurance (EPLI) or another product — depends on policy wording, claim facts, and market placement. This article explains when employment claims are typically covered by D&O, when they are excluded, what to watch for in U.S. jurisdictions (with examples for New York, California and Texas), and how market pricing and endorsements alter exposure.
Quick summary
- Employment claims can be covered under D&O when they allege wrongful managerial acts (e.g., wrongful termination, discrimination, retaliation) against directors/officers as individuals.
- Purely employment-centric claims (payroll disputes, workers’ compensation, statutory wage/hour) typically fall outside D&O and into EPLI or other lines.
- Coverage scope varies by form, Side A/B/C insuring agreements, and specific exclusions (e.g., bodily injury, ERISA, criminal acts).
- For mid-market and public companies, brokers typically see D&O premiums far higher than standalone EPLI; placements and endorsements materially affect cost.
How employment claims interact with D&O: the fundamentals
When employment claims fall inside D&O
D&O may respond when the claim alleges a “wrongful act” by a director or officer related to employment decisions. Typical scenarios include:
- Allegations of discrimination, harassment, retaliation, or wrongful termination naming senior executives personally.
- Derivative claims where shareholders claim that the board’s employment practices harmed shareholder value (e.g., a board’s failure to address systemic harassment causing reputational loss).
- Regulatory or governmental enforcement actions that name officers/directors for managerial failures tied to employment practices.
Key policy drivers:
- The D&O insuring agreement (especially Side A for individual directors) and the definition of “wrongful act”.
- Whether the policy contains an employment practices exclusion or an explicit carve-back for employment claims.
- Allocation language for defense costs between D&O and EPLI or other policies.
When employment claims fall outside D&O
D&O usually excludes or will not respond to:
- Claims that arise from wage/hour disputes, workers’ compensation, or occupational illness/injury (covered by WC).
- ERISA fiduciary breach claims (often addressed by fiduciary liability insurance).
- Statutory penalties and many class actions focused solely on employment law violations, unless directors are personally alleged to have committed a managerial wrongful act.
- Criminal acts and intentional illegal conduct by a director/officer (often excluded).
Key policy features that determine outcomes
Side A / B / C — why it matters for employment claims
- Side A (individual coverage): Pays on behalf of directors/officers when the company cannot indemnify (personal exposure). Employment claims naming individuals are most often defended under Side A.
- Side B (company indemnification): Reimburses the company for indemnifying directors/officers. If the company indemnifies, Side B may respond.
- Side C (entity cover): Often called “entity securities” coverage — less likely to cover typical employment claims, but can respond when entity is named for managerial wrongdoing with securities implications.
See more on which Side matters in Side A vs Side B vs Side C: Which Coverage Matters Most in Directors and Officers (D&O) Liability Insurance?
Common D&O exclusions that bite on employment claims
- Employment practices exclusion (broad wording may bar most employment-related claims).
- ERISA exclusion (for benefits/fiduciary claims).
- Wage-and-hour, payroll, or bodily injury exclusions.
For guidance on overlaps and gaps with fiduciary exposure, see Fiduciary Exposure and Directors and Officers (D&O) Liability Insurance: Overlaps and Gaps.
Comparative snapshot: D&O vs EPLI vs D&O with EPL endorsement
| Feature | D&O (standard) | EPLI (standalone) | D&O + EPL endorsement |
|---|---|---|---|
| Typical target risk | Directors/officers wrongful acts | Employment practices (discrimination, harassment, wrongful termination) | Combined protection for managerial and company exposures |
| Defense for individual directors | Yes (Side A) | Sometimes (if individuals named) | Broader, reduces coverage gaps |
| Common exclusion | Employment practices (may vary) | Corporate governance claims (usually) | Depends on wording: may fill gaps |
| Typical buyer | Public & mid-market companies | SMEs and companies with exposure to employment claims | Larger private & public companies seeking consolidated program |
Pricing examples and market context (United States, with regional notes)
The U.S. D&O market has fluctuated in recent cycles; premiums depend on revenue, industry, limit, claims history, public vs private status, and jurisdiction (e.g., California and New York courts tend to see more employment-litigation activity).
Representative premium ranges (market examples used by brokers and carriers such as Chubb, AIG, and Marsh):
- Small private company (revenue <$10M) — $1M limit: $3,000–$15,000 annually.
- Mid-market company ($10M–$500M revenue) — $5M–$10M limit: $25,000–$150,000 annually.
- Public company (significant revenue, complex risks) — $10M+ limits: $150,000–$1,000,000+ annually.
Carriers that underwrite and publish D&O product information include:
- Chubb — D&O and management liability programs (nationally available, large appetite) (see: https://www.chubb.com/us-en/business-insurance/directors-officers.html).
- Marsh / large brokers — market commentary and placement support for varied client sizes (see: https://www.marsh.com).
- AIG, Travelers, and others provide tailored D&O and EPL solutions for sectors like tech (San Francisco), finance (New York), and energy (Houston).
EPLI standalone pricing for U.S. companies varies widely:
- Small businesses: $1,000–$7,000+ annually (depending on payroll, employee count, and location such as California where exposure is high).
- Mid-market risk placements often see EPLI premiums of $10,000–$100,000+ depending on limits and claims history.
Market context: D&O and EPLI rates rose during hard-market cycles; placements and endorsements (employment carve-backs, deletion of exclusions) will raise premium but reduce gaps. For market trend context, consult broker commentary from Marsh and Aon (market updates available through their sites).
Claim frequency and regulatory pressure
Employment claims remain frequent. The U.S. Equal Employment Opportunity Commission (EEOC) reported significant recoveries for discrimination victims — an indicator of active enforcement and settlement volumes (EEOC press releases and FY statistics are useful benchmarking data) (see: https://www.eeoc.gov/newsroom/).
Practical steps for in-house counsel, CFOs and risk managers (New York, CA, TX focus)
- Review D&O policy definitions of “wrongful act” and any employment practices exclusion. If broad, negotiate a carve-back or obtain a standalone EPLI.
- Consider Side A enhancement for companies with limited indemnification capacity (especially important in California and Delaware litigation climates).
- Coordinate indemnity agreements for officers and review director & officer indemnification bylaws.
- Obtain quotes from multiple carriers/brokers (Chubb, AIG, Travelers, Marsh/Brokers) and request sample policy wordings and endorsements that specifically address employment claims exposure.
- For companies headquartered in high-exposure states (California, New York, Texas), factor state law differences (e.g., FEHA in California, NY Human Rights Law) into placement strategy and limits.
Actionable checklist prior to renewal
- Obtain claim examples and loss runs for employment claims.
- Map claim scenarios to policy insuring agreements (Side A/B/C).
- Decide whether to buy a standalone EPLI or a D&O with EPL endorsement.
- Negotiate defense allocation language to avoid cost-shifting disputes.
- Consider higher limits or excess layers if facing regulatory investigations or litigation.
Conclusion
Employment practices claims frequently intersect with D&O coverage but do not automatically sit within a D&O policy. Whether a claim is covered turns on specific policy wording, the nature of the alleged wrongful act, and whether individuals are targeted. In the U.S. market — particularly in states like California, New York, and Texas — prudent risk transfer typically involves a coordinated program of D&O (with Side A protection and appropriate carve-backs) plus EPLI or endorsements that close gaps. Work with experienced brokers and counsel, review sample wordings, and model premium and retention trade-offs to protect directors, officers, and the company.
Internal resources for deeper reading:
- Comprehensive Guide to Coverage Types in Directors and Officers (D&O) Liability Insurance
- What’s Covered Under Directors and Officers (D&O) Liability Insurance: Securities, Fiduciary and Employment Claims
- Side A vs Side B vs Side C: Which Coverage Matters Most in Directors and Officers (D&O) Liability Insurance?
Sources and further reading
- Chubb: Directors & Officers Liability Insurance overview — https://www.chubb.com/us-en/business-insurance/directors-officers.html
- Marsh (market commentary and D&O resources) — https://www.marsh.com
- U.S. Equal Employment Opportunity Commission — press releases and FY statistics (example FY 2022 recoveries) — https://www.eeoc.gov/newsroom/