As a director or officer of an organization, you make many important decisions regarding everything from policy choices to financial aspects. These decisions help your company to succeed, but they can also leave you and your organization open to lawsuits. Lawsuits that can be costly to you personally but also to your organization.
Directors and offices can be sued for a variety of reasons related to their roles, including:
- Breach of fiduciary duty, resulting in financial loss or bankruptcy
- Misrepresentation of company assets
- Misuse of company funds
- Failure to comply with workplace laws
- Theft of intellectual property
- Poaching competitor’s customers
- Lack of corporate governance
How can you protect yourself and the organization from the financial burden of these lawsuits?
Directors and officers (D&O) liability insurance protect individuals who serve as directors or officers of organizations from the financial costs associated with being sued for actual or alleged wrongful acts in managing the organization. D&O liability insurance also typically provides protection for the organization.
How does D&O insurance work?
D&O insurance policies typically include 3 different types of coverage, including:
- A-side coverage. Covers directors, officers, and possibly employees for defense costs, settlement fees, or judgments if the company cannot compensate them.
- B-side coverage. Covers the organization for directors’, officers’, and employees’ losses when the company cannot compensate them.
- C-side coverage. Financially protects the organization in its own right. This coverage is also commonly called “entity coverage” and may reduce the limits available to protect the individual officers and directors.
It is important to note that illegal acts or profits are typically not covered under a D&O insurance policy.
How much does D&O insurance cost?
The cost of D&O insurance varies based on a number of factors, including:
- Type of business
- Claim history
- Amount of debt
These factors differ from organization to organization and therefore the costs will differ as well. D&O insurance can usually be purchased as its own policy or combined with other coverages. Typically, the organization purchases it for the benefit of its directors and officers. The best way to get an accurate idea of what your cost would be is to get some quotes from your independent agent.
All organizations, big or small, can benefit from having D&O insurance. This includes non-profit, for-profit, and private businesses. Your organization does not need to be making millions in revenue to be a target, small businesses are just as much at risk. Having D&O insurance protects not only you personally as a decision-maker but also your organization from large financial losses.
For more information on directors and officers liability insurance or to get started with some quotes, give us a call at 844-GANNON’S or email us at email@example.com.