What You Need to Know about D&O Insurance
If you’ve been keeping up with recent news, you might have seen or heard about several layoffs in the tech industry. As the Federal Reserve Bank continues to slow the economy to combat rising inflation, many experts believe that more businesses will continue to see job freezes and potentially more layoffs in the coming year. Unfortunately, layoffs and terminations often create stressful environments for companies and individuals, even if the layoffs or terminations aren’t economic-related. In addition, you’ll likely see new lawsuits announced due to these layoffs. Who is usually at the foot of all this litigation? Directors and officers can face the wrath of disgruntled employees, vendors, competitors, customers, and investors affected by “wrongful” business changes. D&O (Directors & Officers) Liability Insurance can help your business stay protected against these lawsuits.
What is D&O liability insurance?
D&O liability insurance protects directors and officers (and their spouses and personal assets) of a corporation if employees personally sue them, vendors, competitors, investors, and customers for perceived wrongdoing. The policy usually protects the company, covering legal fees, settlements, and other legal costs. Reasons for suing can include the following:
- Breach of fiduciary duty resulting in financial losses or bankruptcies
- Misrepresentation of company assets
- Misuse of company funds
- Failure to comply with workplace laws
- Lack of corporate governance
Why is D&O liability insurance an excellent policy to have?
Besides the layer of protection against litigation, having D&O liability insurance can help encourage top talent to be a part of your board of directors. Board members with good business experience qualified to serve on your board are usually seasoned executives with significant corporate and personal assets, leaving them vulnerable to these lawsuits. If you have a D&O liability insurance policy, these potential board members will feel more secure knowing their assets are protected. This is particularly helpful when your business is a non-profit, as most board members spend extra time on your board as a generous measure. Protect your board volunteers with D&O insurance.
Does D&O liability insurance exclude any coverage?
D&O insurance will not provide coverage against dishonesty, fraud, and criminal or malicious acts committed deliberately. It also does not cover bodily injury or property damage (usually covered under standard business insurance policies) or pending litigation at the time of policy start. Knowing what your insurance policies cover and don’t cover is essential, so be sure to research and ask our helpful agents what you need for your unique situation.
How do I get started?
Ask yourself if you need D&O liability insurance if your company works with vendors or government entities. Gather some background information and contact one of our helpful agents to discuss your next steps. Visit our website or give us a call today.
In case you missed it: Check out “Cybersecurity Protection is not Just for October” to learn how to stop hackers from stealing your confidential information year-round.