Directors and Officers
What is directors and officers insurance?
Directors and officers insurance (D&O) can cover your leadership’s defense costs and damages if they are named in lawsuits resulting directly from their decisions.
WHO NEED D&O INSURANCE?
Private Companies
You may think that because you’re privately held or a family-run business, you’re not at risk. It’s time to think again. With exposures on the rise, any organization that has business relationships with customers and third-party suppliers is open to a lawsuit.
Nonprofit Organizations
Don’t wait for a lawsuit to happen — if you have an advisory board or committee, you run the same risks as private and public companies. And the mistake to go without directors and officers insurance can be costly and difficult to recover from.
Public Companies
If you have shareholders, you need directors and officers insurance. If shareholders feel misled by your leadership’s decisions, your company is at risk. With directors and officers Insurance, you give your leadership the peace of mind to act with confidence.
COVERAGE FEATURES
Personal Asset Protection
Protect your directors and officers with coverage for monetary judgments and settlements stemming from negligence or breach of duty, loyalty or care to the organization.
Claims Protection
Guard your organization’s leadership against costly civil, criminal, judicial, administrative, regulatory, or arbitration proceedings.
Workplace & Employment Protection
Directors and officers insurance protects leadership if they are held liable for breach of fiduciary duty, failure to exercise reasonable care and employment-related suits that allege harassment, discrimination or wrongful termination.
COMMON CLAIMANTS
Regulatory Bodies
Public authorities such as the US Department of Justice can investigate and press charges for misappropriation of grant funds.
Donors
Can make a claim for misrepresentation of monetary donations.
Clients and Customers
Can sue for misconduct and failure of your organization to deal with harmful behavior.
Suppliers and Third Parties
Can allege damages resulting from being promised business that never materializes.
Competitors
Can allege patent and trade secret infringement by a former employee who now works for your organization.
Employees
Can file suit if they experience discrimination, harassment or wrongful termination.
Shareholders
Can allege that leadership is not forthcoming in financial communications and misleads stockholders about the organization’s financial health.
Creditors
Can allege fraudulent misrepresentation if the organization is unable to repay its debt obligations.
* Don’t Risk Being Excluded
A robust D&O policy will provide protection for the corporate
balance sheet and the personal assets of your leaders. But don’t
fall into the trap of thinking that D&O policies are “one size fits all.”
Consider the following:
CUSTOMIZE THEIR COVERAGE.
Tailor your D&O coverage to make sure it properly addresses your business needs.
When we work with you, we consider many factors, including: What are your
coverage priorities — business asset or personal asset protection? Should the
policy insure all employees, or be limited to the board and executive team? Are you
comfortable with the insurer controlling the defense and selection of counsel in a
claim? Knowing that defense costs can mount quickly, are your limits high enough to
cover the company and individuals in the event of a protracted claim?
AVOID OVERLY BROAD EXCLUSIONS.
All D&O policies contain some basic exclusions. However, the specific wording of
those exclusions can make the difference between being paid by your insurer and
having to fend for yourself on your own dollar. For example, all D&O policies contain
personal conduct exclusions for illegal profit, fraud and criminal acts by directors
and officers. Even if you didn’t participate in any such activity, a suit could claim you
did — and if your policy isn’t properly worded, you might not be afforded sufficient
coverage to defend yourself. Pay attention to exclusions and coverage exceptions,
including contractual liability, bodily injury, pollution, and intellectual property/
copyright infringement.
CONSIDER ANTI-TRUST/UNFAIR TRADE COVERAGE.
Many D&O policies exclude antitrust or unfair trade coverage for claims made against
the business entity. Examples of such claims include class actions from clients alleging
deceptive trade practices, or suits from competitors alleging unfair trade practices or
tortious interference. If not removed, this exclusion can significantly limit the potential
coverage afforded to the balance sheet protection of your company. This coverage can
sometimes be negotiated with private-company D&O insurers.
CONTROL THE THINGS YOU CAN.
Late reporting is one of the most common reasons for claims denial. Our brokers work
with you to determine the triggers for claims, and the specific timeline requirements
for reporting. Even if a matter seems unlikely to exceed your deductible, it should
be reported as soon as possible. Waiting can put coverage for that claim, and future
matters, in jeopardy. Review your policy’s rules about reporting, and be unarguably
specific about when, and by whom, reporting should be done.
ENSURE YOUR BUSINESS LIABILITY POLICIES
FIT TOGETHER LIKE A PUZZLE.
A D&O policy will exclude coverage for bodily injury and property damage (BI/PD),
because those types of exposures are typically addressed by your General Liability
(GL) policy. But what if, for example, an explosion injured workers and damaged your
property, and a class action lawsuit was filed against your directors and officers for
the loss in business value caused by not ensuring internal safety protocols? There’s a
chance your GL policy wouldn’t respond to shareholder matters — and that your D&O
insurance wouldn’t cover the claim because it arose out of BI/PD. Make sure all your
policies fit together, without any gaps.