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Primary Loss Types Covered by Directors and Officers (D&O) Liability Insurance: Securities, Employment and More

Directors and Officers (D&O) liability insurance is essential protection for corporate leaders in the United States. This article—part of the "Fundamentals of D&O Liability Insurance" pillar—breaks down the primary loss types D&O policies cover, real-world severity ranges, typical claim triggers, and how geography and insurer selection (e.g., New York City vs. San Francisco vs. Chicago) influence pricing and placement.

For related background, see:

Why D&O Covers Multiple “Primary” Loss Types

D&O policies protect individual directors and officers—and often the organization (entity side)—from civil and some regulatory claims arising from alleged wrongful acts in management. The breadth of exposures is wide because modern corporate governance and litigation environments create claims from many sources: investors, employees, customers, regulators and competitors.

Key drivers of exposure:

  • Increasing securities litigation and shareholder activism.
  • Higher frequency of employment-related claims (harassment, discrimination, wage disputes).
  • Regulatory enforcement by federal and state agencies.
  • Cyber incidents and disclosures that cause investor losses.

Market context: D&O pricing and capacity shifted materially after 2020–2023 market cycles. Brokers and market reports documented rate increases and capacity tightening, especially for public companies and technology firms. See Marsh’s market analysis for U.S. and global D&O trends. (Sources: Marsh; Hiscox; Cornerstone Research.)

Primary Loss Types: Overview Table

Loss Type Typical Claimants Common Triggers Typical Severity / Cost Range (U.S.) Notes on Coverage
Securities/Investor Claims Shareholders, institutional investors Alleged misstatements, omissions in public filings or private financing disclosures, M&A disclosure failures Settlements frequently range from $500k to $50M+; large public settlements can exceed $100M (varies by company size and facts) Often the costliest for public companies; entity-side & individual defense costs significant
Employment Practices (EPL) Current/former employees Discrimination, harassment, wrongful termination, retaliation Typical settlements or judgments for small-to-mid firms: $50k–$1M; class actions or high-profile cases can run $1M–$10M+ Many D&O policies include employment claims on the D&O side; separate EPLI may be required
Fiduciary Breach (ERISA) Plan participants Improper investment decisions, breach of plan duties ERISA settlements often start from $250k and can exceed $10M for large plans Sometimes covered under D&O or through separate fiduciary liability policies
Regulatory/Investigations (SEC/DOJ/State AG) Regulators Fraud, false statements, compliance failures Defense costs only in some policies; fines/penalties often excluded — defense costs alone commonly $100k–$5M+ Coverage nuances: many D&O policies cover defense for investigations but not monetary fines and penalties
Derivative / Shareholder Derivative Suits Shareholders on behalf of corporation Alleged breaches causing corporate loss Settlements & costs vary widely — often $250k–$10M+ Entity-versus-individual allocation matters; many derivative suits settle with corporate governance reforms

(Severity ranges are illustrative; individual claim outcomes depend on company size, industry, and facts. Sources: cornerstones of market data including Marsh and Cornerstone Research.)

Deep Dive: Securities (Investor) Claims

Securities claims are the signature exposure for D&O, particularly for public companies and high-growth private firms raising capital in the U.S.

  • Triggers: alleged false/misleading statements in annual reports, earnings releases, prospectuses, private placement memoranda, or failure to disclose material risks.
  • Claimants: institutional investors (e.g., pension funds), activist investors, or plaintiffs in securities class actions.
  • Severity: settlements often scale with company market capitalization and the class certifiable damages; small-cap public companies commonly see D&O defense spend in the $500k–$5M range per matter; large-cap matters can rise well beyond $50M.
  • Market effects: Active markets like New York City and San Francisco see more securities litigation and correspondingly higher D&O pricing and retentions.

Practical pricing examples (U.S. market):

  • Small private companies (e.g., a 10–50 employee startup in San Francisco or New York) with $1M/$1M limits often see annual D&O premiums in the range of $1,000–$7,000 depending on sector and prior rounds (Hiscox underwriting data).
  • Mid-market private companies and small public companies often face premiums from $10,000–$100,000+ for $1M–$5M limits, depending on revenue, industry, and claims history. (Source: Hiscox; Marsh market commentary.)

Source reference: Hiscox’s U.S. D&O overview and market commentary offers typical small-business ranges and underwriting factors: https://www.hiscox.com/small-business-insurance/directors-and-officers-insurance

Employment Practices (EPL) — A Growing Driver of D&O Claims

Employment-related allegations are frequently brought directly against directors and officers for alleged oversight failures, negligent hiring/retention, or hostile workplace allegations.

  • Common claim types: harassment, discrimination (Title VII, ADA, ADEA), retaliation, wage-hour collective actions (FLSA-related).
  • Severity: Many claims against small-to-mid companies end under $1M, but high-profile or class-wide matters frequently exceed $1M–$5M.
  • Interaction with EPLI: Some organizations buy separate Employment Practices Liability Insurance (EPLI) to complement D&O; EPLI often covers employee-only claims while D&O addresses allegations tied to managerial acts.

Regulatory & Investigation Exposure

Regulatory investigations (SEC, DOJ, state attorneys general) create substantial defense costs. Many D&O policies cover defense for individual directors and officers against regulatory inquiries but exclude fines and penalties in many cases.

  • Example: SEC investigation defense costs easily surpass $250k–$2M depending on complexity.
  • Where fines are insurable varies by state law and policy wording—companies should review exclusions carefully.

Cornerstone Research and regulatory enforcement reports show the entrenched volume of securities filings and investigative activity that drive demand for D&O placements: https://www.cornerstone.com

How Location and Carrier Choice Affect Pricing

Geography matters in the U.S.:

  • New York City and San Francisco: higher litigation frequency and larger case valuations — higher premiums and often higher retentions.
  • Midwest (Chicago) and Sunbelt: generally competitive capacity but sector-dependent pricing.

Carriers and pricing examples:

  • Hiscox: small-business D&O cost ranges cited earlier and tailored policies for startups and nonprofits (see Hiscox).
  • National carriers such as Chubb, AIG, and Travelers are active on larger accounts and excess layers; mid-market placements often begin in the $10k–$50k range for primary limits depending on revenue and risk profile. See Chubb’s product overview: https://www.chubb.com/us-en/business-insurance/directors-officers-insurance.html

Market reports (e.g., Marsh) document rate movement and capacity trends that underlie these pricing tiers: https://www.marsh.com

Buying Guidance — What Boards Should Ask

  • Which loss types are included on the D&O policy’s “entity side” vs. only on the “individual side”?
  • Does the policy cover defense costs for regulatory investigations (SEC, DOJ) and under what conditions?
  • Are employment claims explicitly included/excluded — do you need a separate EPLI policy?
  • What retentions and limits are appropriate given company size, industry and jurisdiction (NY, CA, IL)?
  • Which carriers provide excess layers and what are current market attachment points?

For a starter checklist, refer to: Quick Checklist: Do You Need Directors and Officers (D&O) Liability Insurance for Your Organization?

Conclusion

D&O liability insurance in the United States covers multiple primary loss types—most notably securities/investor claims, employment practices claims, fiduciary/ERISA exposures, regulatory investigations, and derivative suits. Severity ranges and pricing vary dramatically by company size, public vs. private status, industry, and location (e.g., New York City, San Francisco, Chicago). To secure appropriate protection, boards and management should match coverages to actual exposures, confirm policy wording on entity-side vs. individual-side coverage, and consult experienced brokers and carriers (Hiscox, Chubb, AIG, Marsh) to get competitive, tailored quotes.

Further reading:

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