Did you know that your Board of Directors and Officers could be held personally liable if they’re accused of wrongful acts or they’re the subject of a lawsuit? Directors & Officers (D&O) Liability helps by covering the defense costs and awards and settlements (damages) from these claims.
Even though a Business Insurance policy will provide coverage for the business, the company’s officers could still be held liable or sued for their assets in a claim. This is where Directors and Officers Insurance comes in to provide additional protection.
Though a company’s officers must act in the best interest of their shareholders while abiding by the law, mistakes can happen, or the officers’ acts and intentions may be misinterpreted. There could even be instances where the executives failed to exercise reasonable care, which is all potentially covered under D&O insurance
Due to the complex nature of some of the claims and the structure of the organizations, D&O insurance provides a broad range of coverage for perceived “wrongful acts.” Some of the most common claims include:
The above claims fall into these coverage categories, and we’ve included a small list (though not comprehensive) of examples:
Here’s the coverage you can expect from D&O Insurance:
If your business relies on top talent in an executive capacity, you’ll need D&O Insurance to attract and retain top talent.
Some of the businesses that carry D&O Insurance include:
Companies that undergo mergers and acquisitions, have volatile earnings, or a potential conflict of interest can find themselves in the middle of a lawsuit. The company’s directors’ and officers’ assets may be at stake. To add insult to injury, even a spouses’ assets can be at risk.
The statistic that 70% of directors and officers have inquired about their coverage should be a clear warning sign that this type of protection is a requirement for organizations with an executive team or board.
There are definite advantages to carrying this policy, including:
Coverage applies when the company acts in good faith. If the company and its representation intentionally commit fraud or breaks the law, coverage will not apply.
Here are some examples of acts that would void coverage:
One example would be a supplement company selling a product for back pain. If they promise to “cure” the condition without providing proper data, studies, and evidence, they could be sued by customers who fail to notice an improvement or resulting decrease in their symptoms. The company’s D&O policy would provide coverage for this claim and the resulting lawsuit.