Directors and officers liability insurance is as it sounds: it covers corporate directors and officers for claims made against them related to their stewardship or any range of other company matters. Without it, directors and officers are at risk of having their personal assets at stake of being taken away in connection with a corporate lawsuit.
Another major advantage of directors & officers liability insurance: the coverage can help reduce the burden of legal costs incurred while fighting lawsuits. Legal fees reaching into the million-dollar range are not out of the realm of possibility for matters that make it to trial. And in these cases, management would not want to be asked why it didn’t have directors and officers liability insurance in place before the trouble started.
Here are a few of the scenarios in which directors and officers liability coverage would come in handy:
-- A company’s bankruptcy leads to a lawsuit alleging a breach of fiduciary duty.
-- A merger between two companies leads to unhappy shareholders concerned about the proposed terms of the deal.
-- A company is alleged to have misrepresented key financial data to executives/employees.
-- An activist investor sues to get a couple of hand-picked candidates on a board of directors slate.
For smaller firms, the prospect of such corporate drama may seem like a long shot. However, given the high potential cost of fighting a D&O suit, a policy can provide peace of mind, not to mention protection for a firm’s assets. Finally, it lifts a burden off of the directors and officers, who often have tough decisions to make and should be protected if they are sound and conscientious stewards for the firm.
If your company is looking to protect your board members and officers, let’s have a conversation about directors and officers liability insurance and how it can work for you. For more information on this topic, contact a Plexus property & casualty client executive at 847-307-6100, or contact us via the web. We’re here to help — and we’re happy to help.