Why Do We Need Directors and Officers Liability Insurance?
- Over 50% of privately held firms have had D&O related claims
- 20% have had an employment related claim
- The average defense cost for a D&O claim is around $75,000
- It protects the company's assets against lawsuits brought by shareholders and third parties.
- It protects the personal assets of a company's directors and officers.
- It provides reimbursement to the organization to indemnify directors and officers for their losses.
- It helps the company monitor and provide defense costs associated with responding to lawsuits and investigations.
Proactive Risk Management
- Consider Directors and Officer Liability Insurance as part of your risk management program.
- Determine if there are any conflicts of interests among the directors. Directors and officers should avoid situations where their personal interests may, or may appear to, be in conflict with the best interest of the company.
- Directors need to be educated in the following: Antitrust, political contributions, harassment, and confidentiality.
- There should be regular scheduled board meetings, including proper notice. Meeting minutes should be retained forever.
- Utilize a qualified attorney, insurance agent, and accountant to help you manage your risk.
- Consider Employment Practices Liability Insurance. Employment-related claims represent a high-visibility, fast-growing area of D&O liability.
- Establish internal controls for accounting and financial reporting.
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