Directors & Officers (D&O) Coverage
Presented by Justin Yurchenko
Every Board of Director member needs to realize the risks of operating any organization, and how to reduce those risks with appropriate management strategies. Written and implemented risk management procedures can serve as an effective way to monitor and mitigate risk within any organization. However, when these strategies are unsuccessful, the transfer of risk should fall to your insurance policy.
Directors and Officers insurance (D&O) is an important safeguard to any for-profit or nonprofit organization. D&O protects the directors, officers, employees, shareholders (not involved in management) and sometimes even volunteers. Unfortunately, even in today’s litigious environment, only 28% of companies with revenue of less than $100 million have purchased D&O coverage. In most cases, board members do not foresee any possible litigation, which is the main reason for not purchasing coverage. This is a common misconception, as just about any board can be a sued; moreover, claims can come from just about anyone – employees, customers, board members, vendors, creditors and current clients.
At the heart of any D&O policy lies the promise to indemnify the individual directors and officers in the event they are subject to allegations of wrongful conduct within their organizational duties. The primary coverages offered under a D&O policy are as follows:
- Coverage for claims made against the company, its directors, officers, managers, employees and, sometimes, volunteers.
- Employment Practices Liability, which includes allegations such as wrongful termination, discrimination, and harassment.
- Fiduciary Liability coverage
- Employee Dishonesty coverage
- Kidnap & Ransom coverage
Choosing the right carrier and policy limits is often a difficult process. Each carrier has specialized coverage wording and exclusions. It is important to work with an experienced broker who can determine the best available combination of D&O pricing and coverage for your organizational needs.
At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.