Is the New Director Automatically Covered by the Existing D&O Insurance Policy, or Do I Need to Notify the Insurer?

Yes, you should generally notify your insurance company when you add a new director to a board seat previously held by another director. This is especially important for policies such as Directors & Officers (D&O) insurance, which provides liability coverage for the actions and decisions of company leadership.

D&O insurance policies are structured to cover specific individuals named in the policy or those who fall within the definition of "insured persons." Adding a new director may change the risk profile of the organization, particularly if the incoming individual has a different background, level of experience, or potential exposure to regulatory scrutiny. Insurance carriers need to be informed of such changes to assess the potential impact on coverage and ensure compliance with policy terms.

Failing to notify the insurer about changes in board composition could lead to coverage complications if a claim arises related to the new director’s actions. Some policies include clauses that require prompt disclosure of changes in company leadership, and non-compliance might result in claim denial or policy cancellation.

Additionally, informing your insurer allows them to provide updated risk management guidance tailored to the new director's role and responsibilities. It can also help your company review and adjust coverage limits if needed, ensuring adequate protection for the evolving leadership team.

To avoid potential gaps in coverage, it's best practice to proactively communicate any board changes to your insurance provider and review your policy to confirm any specific reporting requirements.

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03/31/2025