Directors & Officers Professional Liability (D&O). Directors and
Officers are fiduciaries of the corporation they serve and therefore, carry
with them a host of legal obligations that can result in loss exposures for
corporate wrongdoing. They can be held personally and financially liable
for actual or alleged breach of duty in the course of managing the
affairs of a corporation and ensuring its compliance with the numerous
laws and regulations that govern its operation.
Also see: Why Buy D&O
D&O insurance covers financial liability claims against a company's
officers and directors, including the CEO, chief financial officer, vice
presidents, and shareholder-elected directors. Any decision involving the
investment of money is fair game for a stockholder lawsuit, whether
from outside stockholders or from employees; companies structured to
include a board of directors should purchase D&O coverage. Some
of these structures include:
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Financial Institutions. Banks, insurance companies,
securities brokers/dealers, captive life agents, investment advisors, mutual
funds, and other financial institutions are all confronted with complex and
dynamic exposures. Each of these institutions requires uniquely tailored solutions.
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Limited Liability Companies. In this litigious
society, general partners of limited partnerships are prime
targets. Employees, competitors, creditors, regulators - even
your limited partners can take you to court. When they
come after you, they'll go after your assets too.
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Non-Profit Organizations. A volunteer -
or any member of a non-profit organization - is just as liable for
a damaging lawsuit as a corporate employee. Directors and officers,
trustees, committee members, and others who represent an
organization can also be held liable for the actions and their
personal assets put at risk. Costly litigation and defense attorneys
can deplete the financial resources of the association or group.
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Private Companies. Company officers and directors are
expected to make appropriate and fiscally sound decisions on behalf of
the company they serve. They are vulnerable to lawsuits that jeopardize
their personal assets and professional reputation. Employees. Investors.
Customers. Suppliers. Vendors. Competitors. Government agencies.
Privately owned companies probably don't like to think of these as
threats, yet any one of them can inflict a potentially catastrophic
financial loss. In the case of a lawsuit, a company can find itself
spending enormous amounts on defense costs, not to mention a costly settlement.
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Public Companies. These days, stockholders
expect a pot of gold at the end of every rainbow. Stockholder expectations
are higher than ever, which means that any development that changes
the course of business can trigger a lawsuit. A troubling economy,
downsizing, mergers, acquisitions, bankruptcy, litigation, initial
public offerings, leveraged or management buyouts, and new
management teams are just some examples of events that can send
shock waves through a publicly-held corporation - and increase
the liability exposures of corporate executives.
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