Directors and Officers (D&O) liability insurance is essential for every professional services firm-- i.e. law firms, accounting firms, physician-owned medical clinics, dental offices, engineering firms, architectural firms, and of course insurance agencies.

D&O insurance protects corporate directors and officers in the event they are personally sued -- often in addition to the company being sued -- by investors, employees, vendors, competitors, and customers, among other parties.

The insurance is just another means of protecting small business interests through specific types of small business insurance coverage that protects directors and officers by covering legal fees, settlements, and other costs. Addtionally, the coverage sometimes can extend to protect the company if it is named in a suit, as well.

When a firm expands and takes on a new manager or director, in many cases, they will demand D&O coverage as a condition of serving or employment because they want to be protected and have their personal assets protected. In a lawsuit happy climate its just smart business.

Directors and officers are sued for a wide variety of reasons. They could be sued for providing inaccurate or unlawful advice, fraud and malfaesence, misrepresentation of company assets, failure to comply with workplace laws, and others. Simply making a poor hiring decision of a new employees employee could expose directors or officers to employment practices legal issues. A 2008 Towers Watson (now TowersPerrin) survey found that 40 percent of all reported D&O claims from public, private, and nonprofit entities involved employment practices, according to an article in the December issue of Inc.

Magazine.

One in six company executives -- or 17 percent -- believe their business will experience a D&O related loss in the next years, Inc. Magazine reports.