Directors and officer’s liability insurance helps protect your business, owners, executives and managers if individuals, competitors, third parties or government regulators make claims. A lawsuit against directors and officers most commonly occurs when shareholders (private or public), clients, competitors or others feel they suffered a loss in the value of their shares because of actions that the board or senior management took or didn’t take. In case you thought smaller private firms are immune from litigation, here are some claim examples.
- A director of medical supply company was sued, along with his company, for allegedly misappropriating trade secrets. $200,000 was spent on defense costs and the case was settled for $400,000.
- The estate of a recently passed director (president) sued the other directors for recent company poor performance. Claim settled for $750,000.
- A company recruited a top sales person from a competitor who had an employment contract. The competitor sued for damages after losing its top producer. Defense costs were $250,000 and case was settled for $560,000.
Risk management, or loss control, is a concept well-known to corporate management. Most businesses large and small take precautionary measures to minimize the risks associated with fire, theft, product liability, work-related injury, and other common business exposures. Proactive management of D&O exposures can improve a company’s ability to recruit talented management, enhance the quality of corporate decision-making, and contain the cost of D&O liability insurance premiums.
What You Should Do:
- Consider Directors and Officer Liability Insurance
- Determine if there are any conflicts of interests among the directors. Directors and officers should avoid situations where their personal interest may, or appears to, conflict with the best interest of the company
- Directors need to be educated in the following:
- Antitrust, political contributions, harassment, and confidentiality
- There should be regular scheduled board meeting, including proper notice. Meeting minutes should be retained forever
- Utilize a qualified attorney, insurance agent, and accountant to help you manage your risk.
- Consider Employment Practices Liability Insurance. Employment-related claims represent a high-visibility, fast-growing area of D&O liability
- Establish internal controls for accounting and financial reporting
At Roussel Insurance we strive for trust and reliability with our clients. Through our 30 years in the insurance business we have learned to achieve immediate and sustainable cost savings for businesses. We can help find you the right insurance options, so that no matter what your budget is we can minimize you’re spending and easily meet your needs.
This information is intended for the client, individual or entity to which it is addressed. These articles contain concepts and opinions, and are not intended to represent the consensus of the insurance or risk community, nor to provide professional legal or tax advice. Please seek professional legal or tax counsel before making any decisions. The information provided does not change or modify any insurance policy, only the actual terms of the in-force policies will govern claim settlements.