Directors & Officers Insurance Debunked
Directors and officers insurance is a fundamental component of any company’s risk management program. A lack of directors & officers insurance may dissuade talented individuals from seeking an executive position at your company, as they don’t want to put their personal assets at risk in the event of a lawsuit.
Directors & Officers Insurance Pricing
A variety of factors determine the price of a company’s director & officers insurance. Some low-risk companies pay pennies on the dollar; others pay a lot more, but they understand it’s a lot less than the expenses they’d incur in a lawsuit. Recognizing the cost drivers of directors & officers insurance—a company’s exposures, legislation and trends in directors & officers insurance lawsuits—can help you decide what coverage your company needs to mitigate its unique exposures.
Directors & Officers Insurance Lawsuits
Even after a thorough assessment of a company’s risks, director & officer insurance continues to be a high-severity product, as carriers are often hit unexpectedly with catastrophic claims. In addition, as the litigation process grows lengthier and multiple lawsuits erupt from a single transaction, a company can quickly exhaust its primary layer of director & officer insurance coverage.
Even if the director or officer is not found liable defence costs can be severely financially damaging.
Some common types of lawsuits that directors & officers insurance policies can respond to include:
* Breach of fiduciary duty lawsuits
* Employment-related lawsuits
* Mergers and acquisitions (M&A) and “merger objection” lawsuits
* Securities class-action lawsuits
* Shareholder derivative suits
Know Your Directors & Officers Insurance Policy
Be aware of exclusions, for some insurance carriers, Employment Practices Liability (EPL) insurance and Fiduciary Liability insurance are policies that are purchased separately from primary D&O insurance. Don’t assume they are automatically included in your Directors & Officers Insurance policy.