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As an officer or director at your organization, you encounter a myriad of employment related exposures. Sarbanes-Oxley regulatory mandates and increased shareholder activism mean directors are at risk for claims and elevated settlement costs.
The legal cost to defend a director is substantial, as are the potential penalties that can be personally incurred. Due to the personal liability risk, which is not covered under a personal insurance policy, protecting boardroom talent can be a challenge. A directors’ and officers’ liability insurance (D&O) policy is part of a comprehensive risk financing strategy.
Unlike a commercial general liability policy that provides coverage for claims arising from property damage and bodily injury, a D&O policy specifically provides coverage for "wrongful acts,” such as an actual or alleged error, omission, misleading statement, neglect or breach of duty. A D&O policy provides defense costs and indemnity coverage to the entity listed on the policy declarations, which may include the following:
Indemnification provisions are typically included in the charter or bylaws of a corporation. While an important risk component, small to midsize privately held companies or nonprofit organizations often don’t have the financial resources to fund the indemnity provisions, making the bylaws hollow. A D&O policy can provide an extra blanket of security in the event of a covered loss.
The following is a list of additional forms of coverage to protect directors and officers:
Additionally, most D&O polices can be endorsed to provide Employment Practices Liability (EPL) coverage and Fiduciary Liability.
Nonprofit Directors & Officers (D&O) Liability insurance helps cover the defense costs, settlements and judgments arising out of lawsuits and wrongful act allegations brought against a nonprofit organization. Many times nonprofits may not even realize that their board members may be held personally liable for the actions of the organization. Protect your organization's mission and your board member's personal assets – you can’t afford not to.
Whether you’re a nonprofit, privately held or public company, both you and your business can benefit from a D&O policy. Since there is no such thing as a “standard” policy, a professional agent is invaluable when purchasing D&O coverage.