Directors' and Officers' Liability Insurance: An Overview

Authors: Allyson Baker, Glen Boswall and Dianne Rideout

Updated: October, 2006

Initially introduced in the 1930s in the United States as a response to the stock market crash, Directors’ and Officers’ Liability Insurance ("D&O Insurance") did not become a widely held form of insurance until the late 1960s. Since that time, the possibilities for liability as a director or officer of a corporation, whether for profit or not, have increased significantly, in turn creating a demand for insurance addressing these newly imposed risks.

To date, relatively few cases involving the interpretation of directors’ and officers’ liability insurance policies ("D&O policy" or "D&O policies", as appropriate) have reached the Courts in Canada. However, the increased number of actions brought against directors and officers in Canadian Courts suggests that this is about to change. As the origins of the D&O policy lie in the United States, guidance as to interpretation may be found in a significantly larger body of U.S. caselaw, always bearing in mind that no two D&O policies are the exactly same.

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