We have seen this time and time again. A business owner needs just liability insurance to satisfy their landlord or property management company. To save money they turn down any Property, Employers Liability, Workers Compensation and a host of other Coverage’s just to safe some money.
Business owners would be much better off if they had the right Coverage’s to protect their business and their employees. I hate to tell you what would happen if an employee was injured on the job and the business owner does not have Workers Compensation Insurance. It would end up costing the owner thousands of dollars in penalties and additional costs for the injured employee healthcare would also be in the thousands. What we have also seen recently is when the building is damaged by fire or water and a business owner renting the location experiences property damage to their equipment or personal property, it is not covered because they only had Liability and no Property Coverage.
Most business owners who own their building also refuse to purchase Earthquake Coverage on their building. Just imagine what would happen if an Earthquake damaged your business overnight tonight. The costs to rebuild or repair after an Earthquake most likely would not be covered under a Business Owners Policy without Earthquake Coverage.Sure, it may cost the business owner a few more dollars, but not having the right coverage’s could cost thousands. It is not worth it.
Many business owners, presidents, CEO’s and COO’s believe their General Liability insurance will cover them. The General Liability will not cover all of the legal matters brought against a privately held company. Some belief that if a corporation dissolves they are no longer liable and this is not that case; the Directors and Officers personal assets could be at risk.
This is where having a Directors and Officers Insurance Policy is vital to protect both the individual and the company which offers tremendous value at a reasonable cost.
If you own a private company, you have worked very hard to build your business and secure your family’s future. It has been reported that the cost of defending litigation can range from $100,000 to $2,000,000; not many businesses can afford that kind of expense.
Some of the common allegations include:
- Failure to perform appropriate due diligence when making an acquisition
- Misrepresentations or errors regarding the financial health of the organization to a customer or bank
- Misstatements regarding potential future performance of the company to investors
- Careless management strategy that causes bankruptcy
- Breach of duties under applicable security or other statutory laws
- Conflicts of interest when considering personal motives vs. the interest of the shareholders
The estate of a recently passed director sued the other directors for recent company poor performance; the claim settled for $ 750,000.
A company recruited a top sales person from a competitor, who had an employment contract, and the competitor sued for damages after losing its top producer; costs were $ 250,000 and case was settled for $ 560,000
Why purchase a Directors and Office Liability Policy:
Since a director or officer can sometimes be held responsible for acts of the company, most directors and offers want to be covered rather than risk their personal assets.
When a company has a claim the expenses can mount very quickly. Frivolous suites can be very expensive as well. The cost of insurance to protect private a company against a Director or Officer is relatively low.
What does a D&O policy cover? (Defense expenses and financial damages or settlements)
Breach of duty
What does a D&O policy NOT cover?
What are the coverage limits available?
From $ 500,000 to $ 1,000,000 per claim and annual total limit, with a $ 5,000 deductible per claim.
A Directors & Officers Liability Insurance can usually include Employment Practices Liability and sometimes Fiduciary Liability. Do not confuse this with Errors and Omissions Liability. The two are not synonymous. Generally is it a good idea to carry both Directors and Officers Liability Insurance and Errors and Omissions Liability Insurance.
Employment practices suites constitute the single largest area of claim activity under D&O policies. Over 50% of D&O claims are employment practices claims.