Directors & Officers Insurance in Delaware

Delaware at a glance

Indemnification statute

DGCL Section 145

Authorizes indemnification and advancement of expenses for directors and officers.

Exculpation statute

DGCL Section 102(b)(7)

Allows charters to exculpate directors from duty-of-care liability, with key exceptions.

Specialized court

Delaware Court of Chancery

Hears most fiduciary duty and shareholder derivative litigation for Delaware corporations.

Notable driver

High rate of out-of-state incorporation

Many companies incorporated in DE face Delaware litigation despite operating elsewhere.

Delaware as the incorporation capital: why it matters for D&O

A large share of publicly traded and many privately held U.S. companies are incorporated in Delaware, drawn by its well-developed body of corporate case law and specialized judiciary. That concentration means Delaware corporate law effectively sets the governance and litigation ground rules for a disproportionate share of the country's D&O claims, regardless of where a company actually operates.

Delaware's Volunteer Protection Act analog and other nonprofit volunteer protections exist for Delaware nonprofit corporations, alongside the federal Volunteer Protection Act, but as elsewhere these statutes address limited negligence scenarios and provide no funding for a legal defense while a claim is litigated.

DGCL Section 145 indemnification and Section 102(b)(7) exculpation

Section 145 of the Delaware General Corporation Law permits — and in certain successful-defense circumstances requires — corporations to indemnify directors and officers for expenses, judgments, and settlements, and allows advancement of defense costs as they're incurred, subject to good-faith and best-interest standards. Section 102(b)(7) allows a corporation's certificate of incorporation to exculpate directors from personal monetary liability for breaches of the duty of care, though this protection generally does not extend to breaches of loyalty, bad faith, or officers in most circumstances. Together these provisions reduce but do not eliminate personal exposure, and neither indemnification nor exculpation covers claims where the underlying conduct falls outside their protections, which is where D&O insurance, including Side A coverage for otherwise uninsured or unindemnified loss, becomes essential.

The Court of Chancery's role in Delaware D&O exposure

The Delaware Court of Chancery is a specialized business court without juries that hears the bulk of shareholder derivative suits, fiduciary duty claims, and merger-related litigation involving Delaware corporations, and its judges issue detailed, closely watched opinions that shape governance expectations nationwide. This concentration of sophisticated corporate litigation in one court means Delaware directors and officers face a well-informed and active plaintiffs' bar, and disputes there can involve substantial legal spend even when a case is ultimately resolved in the defendants' favor.

Who needs D&O coverage tied to Delaware incorporation

Companies incorporated in Delaware — whether headquartered there or not — commonly carry D&O coverage because their governance disputes and shareholder litigation are typically litigated under Delaware law in the Court of Chancery. Private companies raising venture or private equity capital are routinely required by investors to carry D&O coverage as a closing condition. Delaware-incorporated nonprofits and their boards also benefit from coverage, since exculpation and indemnification provisions in their governing documents face the same practical financing gap as for-profit counterparts.

Who we write this for in Delaware

Directors & officers FAQs for Delaware