5 Facts about Directors & Officers insurance that will make your hair stand on end!

| February 11, 2015

Are you sure you want to do that? It can be risky to serve on a public corporation, or private company or non-profit organization. Many individuals are now suddenly finding themselves being held accountable for their actions or inactions.

It would be very wise and prudent to make sure that you have proper directors and officers liability insurance coverage in place.

One can be sued for breach of duties owed to shareholders, or breach of common law duties. Now a good directors and officers policy will cover your defense costs and damages. This is usually the biggest expense in dealing with a directors and officers policy. Should the company you work for go out of business, legal costs may not be covered.

The safest option is to make sure you have a proper D&O policy in place to protect yourself and your family.

Private companies and nonprofit corporations also have the same exposures. Many times with with a lack of funds or limited resources, can leave a board member with very little to go on should the be sued in a lawsuit.

directors and officers package is a critical component in order to retain the very best qualified and motivated directors and officers as board members. This type of policy would allow them to operate with a free mind and have peace in making quality decisions.

For example a manufacturer was asked to increase his inventory in anticipation of a large volume of orders which were to follow, however the sales did not materialize and the manufacturer was left with a surplus of inventory. They were successful in there lawsuit against the company that had asked them to increase their inventory.

Another example would be a board making plans for expansion that is made known to investors who decide to invest in the company. Due to infighting amongst the board members the plans never materialize and the investors feel as if they have been shortchanged. They would likely be successful in a lawsuit.

Private companies also have some of the same exposures as public companies, there are still allegations of misrepresentation or conflicts of interest. Non profit companies also have similar exposures, however many non profits have limited funds to provide an acceptable defense. Without adequate protection this can leave the personal assets of the board member available for litigation.

Bethel Insurance Brokers can shop the market for you to obtain the proper price protection and coverage from the various companies that offer this product.