Directors and Officers Liability

Directors and Officers (D & O) insurance is a vital component to protecting the leaders of the company from becoming personally liable for their management decisions. Decisions made by the boards of privately owned companies are not immune from public scrutiny and claims for breaches of duty in their functions as directors and officers. Shareholders, employees, customers, suppliers, competitors and in some cases even the government can sue a privately held company and its board.

Our role as your client advisor is to advise you, your company, and the board on properly transferring the liability risks associated with holding a board seat and/ or acting as a director. We will be your advocate in placing coverage with a financially stable insurance company that specializes in Directors and Officers (D & O) Liability insurance.

Personal Director’s Liability Insurance

For years, directors have been protected with a standard Directors and Officers (D & O) liability insurance policy. However that peace of mind may be waning due to the current business environment, not to mention the unprecedented number of corporate scandals, financial restatements, and bankruptcies. According to Chubb Group of Insurance companies, “today’s corporate climate is the most litigious D & O liability environment in history”.

The real question for directors is whether the traditional D & O liability policy is sufficient? In many cases as evidenced in the news, shareholders who believe they have been wronged are looking for their own form of justice and are seeking monetary damages against the personal assets of allegedly negligent or deceitful executives and board members. These suits against the board may exhaust the traditional Directors and Officers (D & O) liability policy and expose the personal assets of the directors and board members. If for example, the limits of liability become exhausted or in the case of a bankruptcy, the corporate entity coverage may become an asset of the bankruptcy estate making the limits unavailable. In this scenario the personal assets of the board members or directors maybe exposed.

In the case of Enron, “Directors were forced to pay a portion of securities class action lawsuit settlements out of their own pockets” The Journal of Wealth Management, winter 2006.