Directors and officers liability coverage, available through NewMark Insurance, is a must for companies with exposures related to their business regarding management policies. This insurance, often referred to as d&o, protects corporate directors and officers in the event they are personally sued by anyone affected by their decisions or actions, including investors, employees, vendors, competitors, and customers. They must therefore be careful with the types of choices or decisions they make. The policy also covers legal fees, settlements, and other costs and can extend to protect the company if it’s named in a suit as well.
D&O Coverage Satisfies The Needs of Investors
When appointing directors or hiring new officers, investors will generally demand d&o coverage as a condition of serving or terms of employment because they don’t want to risk their personal assets should an unfavorable situation arise. In most instances, outside investors such as venture capitalists or other financiers require d&o policies to be in place before providing funding to a business, since they see this coverage as a way to protect their own investments.
Causes For Litigation
Directors and officers are sued for a variety of reasons connected with their company positions, including misuse of company funds, misrepresentation of company assets, charges of fraud, failure to comply with workplace laws, and lack of corporate governance among other issues. These are very serious charges and can have huge financial consequences.
Hiring new employees can often potentially expose directors or officers to employment practices litigation, which is covered by most d&o policies. Employment practices liability (EPL) coverage will provide more robust coverage, and in many cases is warranted since it protects directors and officers, as well as also other individuals within the company. Claims over employment practices are perhaps the most common lawsuits brought against a company’s management and a substantial percentage of all reported d&o claims in recent years stem from public, private, and nonprofit entities.
Some small business executives falsely believe that their general liability or umbrella business insurance policies will cover claims involving directors and officers. Unfortunately general liability or umbrella policies don’t respond to management liability lawsuits. A business of any size will usually have officers along with directors who can be targeted by litigants over their management of company affairs, and the cost of NewMark Insurance to handle such claims is insignificant compared to the protection it provides against a settlement costing six figures or more.