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Does your business need directors & officers liability insurance?
Executives from all company sizes, industry segments, and job functions face litigation risks. It doesn’t matter if they work for a large publicly traded company or a small family-owned business. Organizations that consider investing in a directors & officers liability insurance policy often have at least one of the following:
Companies that want to attract leading candidates for any of the covered positions can increase the attractiveness of the position by reducing the applicant's personal risk exposure with a directors & officers liability insurance policy.
Are board members also covered under directors & officers liability insurance?
Yes, board members can be covered under a directors & officers liability insurance policy. Board members can face unique risks that aren’t covered under general liability policies, unlike management. When they fire executives, take financial risks, or compete with similar products, they become exposed to personal risk that requires D&O to provide a safety net for their personal assets.
What does directors & officers liability insurance cover?
As with any insurance policy, directors & officers liability insurance policies can range in coverage based on discussed options with a qualified insurance agent. A directors & officers liability insurance policy may cover legal expenses if executives are directly sued.
A group of specific officers or all officers
A directors and officers liability insurance policy can be customized to protect a specific group of officers within a business or all officers and directors. This difference should be a requirement that is identified when working with your insurance agent.
An investment that ends up costing a company millions of dollars in lost revenue can easily become the subject of a lawsuit. If an officer is sued due to an investment of company funds that turns out badly, directors & officers liability insurance can cover lawsuit costs and protect that officer’s personal assets.
If a worker names an officer or board member in an employment-related lawsuit, a directors & officers liability insurance policy may cover lawsuit costs to protect their personal assets. These cases can involve discrimination, breach of contract, slander, and more.
A third-party can sue your officers for libel or slander. A directors & officers liability insurance policy can help cover legal expenses that those executives face. Defamation lawsuits can come from any associated third-party, but commonly start with competitors, customers, or other investors.
When a bylaw is overstepped or directly violated, company stakeholders may feel strongly enough to sue. Some bylaws can include clauses like board member election policies, stock issuance, director indemnification, conflict of interest, and voting requirements. If a company stakeholder feels one of these, or other stated bylaw, has been violated, a directors and officers liability insurance policy can protect personal assets of the accused.
Every industry has a different set of regulations they must abide by. In the event an officer does not uphold these standards they can be sued. Guidelines can range from data protection practices like the Health Insurance Portability and Accountability Act (HIPAA) or Payment Card Industry standards (PCI), to physical safety like Occupational Safety and Health Administration standards (OSHA).
What does directors & officers liability insurance NOT cover?
Directors & officers liability insurance will only cover legal expenses related to the management team listed within the policy details unless a whole business policy is purchased. Some scenarios where D&O will not cover expenses are: illegal actions, work-related injuries, customer injuries, errors and omissions, or property damage.
Most illegal actions that result in a criminal investigation against an executive will not be covered by directors & officers liability insurance. Criminal acts like securities fraud, money laundering, embezzlement, and corporate fraud fall outside of typical policy coverage.
Executive or board member injuries
If an executive or board member injures themselves during the course of work, directors & officers liability insurance will not cover their medical expenses. These will typically be covered by a workers’ compensation insurance policy, which is required in most states for businesses with at least one employee.
A general liability insurance policy can help cover medical and legal expenses if a customer is injured while interacting with your business.
Errors and omissions
In case your business is accused of professional negligence like incomplete or inadequate work, you will require a professional liability insurance policy for coverage.
Property damage is not covered under D&O liability insurance. Property damage that occurs to business-owned property is covered under commercial property insurance and third-party property damage is covered under general liability insurance.
How much does directors & officers liability insurance cost?
Directors & officers liability insurance policies can greatly range in price. A small family-run business with only a handful of managers will require significantly less coverage than a large corporation with an entire executive suite, board of directors, board of advisors, and investors. Some other factors that may change a policy’s rates are:
How do I make a directors & officers liability insurance claim?
Most carriers have online claim reporting capabilities, or you can call their toll-free claims reporting phone number. At Winooski Insurance Agency, we are available to provide information about the claim reporting process. Our clients can rest easy knowing our experienced agents are ready to help when needed.
View a list of our partner carriers and instructions on where to file a claim with each.
Why should I get a directors & officers liability insurance policy through an independent agency?
Winooski Insurance has been an independent insurance agency for almost 40-years. During this time, we have created long-term relationships with a multitude of insurance partners which allows us to present you with a broad range of coverage options at competitive rates. We’re committed to helping you address your unique requirements.
“ The level of service and professionalism I’ve received from Jeff and the experienced professionals at Winooski Insurance is unparalleled. I’m grateful to have been referred to Winooski Insurance and truly feel like I have a business partner, not just an insurance company. ”
Cherian Philip, CFO
“ The entire team at Winooski Insurance have done an outstanding job of providing insurance coverage for my company. This is not always easy, as each project has to be reviewed by Winooski Insurance to verify that we have the required coverages. ”
David Bogue, President
Professional Construction Inc.
“ I have personally and professionally used Winooski Insurance for over 15 years. The staff is efficient, the service is excellent, and they work hard to keep the premiums low. I highly recommend Winooski Insurance! ”
Mark Chaffee, Senior Loan Officer
Draper and Kramer Mortgage Corp.