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So you have an awesome company! You have directors and officers in upper management positions. They are awesome, but they are also human. And guess what? They make mistakes. Mistakes that piss customers off. Pissed off customers sue!
Do you want to have to pay for your employee’s mistakes? Didn’t think so.
Then damn straight, you had better protect your company’s directors and officers from litigation.
This is where directors and officers liability insurance (D&O coverage) comes in. D&O insurance is pretty much a necessity these days. It’s a pretty confusing category of insurance. One that many people have a hard time understanding.
First, directors and officers insurance protects against a breach of “duty” by the directors and officers. This insurance pays for ‘wrong’ decisions, (lawsuits against them) whether they are guilty of the accusation or not.
For instance, let’s say Kathy owns a large land surveying company. She acquires another land surveying company and she’s super excited about it. It has 300 employees and has been in business for 5 years, doing well.
Uh-oh. Someone's not happy!
The rules of the old company and the rules of the new company do not mesh. Kathy re-writes the contracts of the acquired employees. A month later, they all sue her, claiming that their contracts are unfairly changed.
She’s glad she’s covered by D&O insurance!
Each insurer defines its D&O policy in its own way, but it generally includes any actual or alleged act or omission, error, misstatement, misleading statement, neglect or breach of duty by an Insured Person in the discharge of their duties.
Directors insurance should cover you for things like:
Failure to provide services
Second, there are no ‘standard’ D&O insurance policies, each policy and its limits must be evaluated individually. You should speak to a representative at Hiscox about your specific situation and needs.
Having good D&O liability insurance can save your company from a lawsuit that could put your entire company out of business.
It also helps you to attract the best people for the job. Many potential directors and officers will be reluctant to join your business if you don’t have this coverage. They know that they are exposed to personal liability. They are not willing to assume such risk.
It’s something you pay for but it’s to protect your business and your business leaders. Heck, some jurisdictions REQUIRE this coverage to be provided for upper management. That’s how critical a D&O policy is.
It is very common for companies to protect themselves as well as their directors and officers from this type of lawsuit by purchasing directors and officers insurance.
Upper management personnel can be sued if they breach their contracts or fail to perform their duties. Your management may find themselves needing to make tough business decisions that might later find you and/or them in deep kimchee!
Common sources of lawsuits covered by D&O insurance are shareholders, customers, regulators, and even competitors in the case of anti-trust or unfair business practice suits.
They wouldn't have come on board if you didn't have D&O.
It’s just a part of doing business. With lawsuits potentially coming from so many different places, this D&O liability insurance is really a necessity.
It is easy to see why more upper management candidates are requiring this type of protection. Many won’t even take a job offer before ensuring that this insurance is in place. You can’t blame them. Everyone in the USA seems to be ‘sue happy’!
Therefore it is almost an essential insurance to have in this day and age.
D&O Insurance Quotes
How do you find yourself some D&O insurance coverage? It’s super easy.
We live in a complicated, fast world. Just do yourself a favor and make this decision easy for your business by getting quotes from Hiscox
They will quickly give you quotes for a directors and officers liability policy from top carriers. Then you can easily compare rates from different companies with minimal effort.
You had better have the right business coverage to fit your business model. Without it, you are at risk to lose your entire company and learn an expensive financial lesson. Mark our words- it’s not something you want to have to deal with!
This insurance is designed to protect you during any successful litigations. We wouldn’t recommend waiting to see if you get sued to get this insurance. By then it’s too late.