Why Should You Consider Directors & Officers Liability Insurance?
February 10, 2009
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Directors & Officers Liability Insurance (D&O) -- Lawsuits against directors and officers are on the rise. Even if your firm is not responsible or negligent, defending these claims (not to mention the distracting time spent away from your core business) can place significant financial and operational pressures on your firm.
Private Companies Can be Vulnerable to Expensive Lawsuits. If you own/operate a private company (one that is not publicly traded on an exchange like NYSE or NASDAQ), your firm could still have private shareholders of your company?s stock. If your company has a board of directors, your directors and officers can be personally sued for your company?s actions.
Make no mistake: the personal assets of your directors and officers could be at risk.
Although a smaller, private firm may not have the exposures of a large, publicly traded corporation, private companies can still have serious risks stemming from a variety of exposures such as exercising poor judgment, employment litigation, unfair business practices, and breach of duty, among others.
The Myths about Directors & Officers Liability Insurance. Some people often describe D&O coverage as ?malpractice? insurance for directors and officers.
Many business owners mistakenly think that their general liability or commercial umbrella policies cover their D&O exposures, but these policies tend to only provide coverage for third party bodily injury or property damage. Most of the exposures previously described would not be covered.
Look Over Your Shoulder: Many Different Parties Sue Private Firms. Aside from private individual shareholders, suits can rear their ugly heads from a variety of sources including employees, federal and state authorities, vendors, customers, competitors, banks, and other creditors.
Decision Time -- Forgoing D&O insurance coverage can be a serious business mistake. Therefore, most businesses should purchase Directors and Officers Liability Insurance. Even if your company has a single owner, it is wise to purchase this coverage. D&O Policies are also available for nonprofit organizations, partnerships and LLCs.
D&O coverage should provide coverage for defense costs, settlements and judgments associated with D&O claims.
Ask Your Agent: Here are Some of the Top Products. Be sure and inquire with your independent insurance agent about appropriate D&O policies for your organization. A few excellent products are ?The Wrap? from St.Paul/Travelers, and the ?Forefront? policy from Chubb.
Disclaimer: The brevity of this article prevents comprehensive consideration of all issues. The information contained herein should not be considered as insurance advice; such is expressly disclaimed. For specific matters, consult with your insurance agent.
Brandon Sutkowi, Personal Lines Manager
Meadowbrook Insurance Agency
I invite your questions and feedback
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