Were you aware that you could be sued by a competitor for recruiting and hiring their employees? Lawsuits targeting board members and execs are becoming very common. This article was written to make sure that you do not believe these fairly
common myths about D&O insurance that could put you and your most valuable team members at significant risk.
Myth #1 – You don’t need D&O insurance if you’re a closely held private business.
D&O insurance is not just for protection against shareholder lawsuits. Claims can come from customers, regulators, creditors and even competitors. The most common complaints are breach of fiduciary duty and failure to exercise due care.
Myth #2 – Directors and Officers aren’t exposed to personal liability because of their actions with respect to the company’s business interests.
The chances are good that your organization’s general liability policy does not include personal liability coverage for your directors and officers. Therefore, D&O insurance is necessary to protect the personal assets of executives as well as the assets of their spouses.
So how does D&O protect employees?
There are three insuring clauses in a typical D&O policy.
- Side A protects the directors and officers from personal loss if the corporation is unable to indemnify them.
- Side B coverage reimburses the corporation for amounts that it is required to pay directors and officers for indemnifiable claims.
- Side C covers the entity itself, usually for securities claims.
We hope you have realized that just because you don’t have shareholders doesn’t mean you don’t need D&O coverage! A D&O policy may be the only thing standing between your organization’s directors and officers and personal asset impairment, in the event of a lawsuit.
You can take the time and talk to an advisor at Metropolitan Risk Advisory to make sure you have the coverage you need.
