Every company has leaders. In most companies these leaders include the founders, officers, and the board. These figures are vital in directing the company towards a successful future. They are usually the brightest minds and sculpt the direction of the company. These people need to be protected from potential lawsuits regarding their management of the company. Directors & Officers (D&O) Insurance gives you that protection.
D&O Insurance protects the personal assets of directors and officers in the event they are sued for mismanaging the business. Directors and officers can be sued from varying groups of stakeholders, including employees, vendors, competitors, and customers for proven or alleged acts of mismanagement.
Directors and officers can be sued for a variety of reasons which include but are not limited to:
- Lack of corporate governance
- Misuse of company funds for personal needs
- Breach of fiduciary data leading to bankruptcy or financial losses
- Misrepresentation of corporate assets
Does your business need D&O Insurance?
Many businesses ask themselves this question and don’t know the answer. We want to change that. There is a perception that D&O insurance should only be purchased by public companies, as they have more exposure to lawsuits. This is a common misconception. A survey done by Towers Watson showed that businesses in all sectors face risk for lawsuits against their directors and officers. In another survey done by Towers Watson, 27% of companies surveyed said they have had a lawsuit filed against their directors.
Your company does not need to have tens of millions of dollars in revenue to have D&O insurance. Every director and officer has exposure to a lawsuit throughout their career. With the average cost of a D&O lawsuit being $697,902, according to the Chubb 2013 Private Company Risk PDF, it can be a smart investment to protect your officers, directors, and business with D&O Insurance.