3 Things No One Tells You About D&O Insurance

When was the last time you thought about D&O insurance coverage??

If the answer is “never,” you’re not alone. However, you can’t afford to overlook this vital coverage, which is expected to be a $22.6 billion industry by 2030.

D&O insurance covers fees and settlements if lawsuits are brought against your company’s directors, officers, or their spouses for alleged or actual wrongful acts. The insurance plan doesn’t cover expenses related to criminal charges or punishments, however.

Let’s take a look at three things no one tells you about D&O coverage, so you can decide if it’s right for your organization.

1. Leaders Can Be Sued for a Wide Range of Activities

Think your leaders aren’t in danger of being sued? You might want to reconsider.?

Not only can anyone bring a lawsuit for almost any reason, but valid lawsuits can result from a variety of activities. For example, through July 19, 2023, over 8,700 lawsuits had been filed by employees against company leadership related to COVID-19.?

Business leaders can also be sued for failures that lead to cyber-attacks, reporting errors, or failing to comply with state or national regulations. Venture capitalists look for D&O before they invest because it protects them as investors.

There’s a lot of potential for lawsuits. You don’t want to leave your leadership unprotected.

2. D&O Protects Your Company, Not Just Individual Officers

The most common D&O policies include coverage to protect individual leaders within your company and the company itself.

By helping protect the company’s assets as well as leadership assets, D&O offers a double benefit for your organization.

SIDE A

Side A coverage refers to the liability coverage offered by D&O insurance. This coverage protects directors and officers against losses that the company will not or cannot indemnify.

Side A coverage insures the individual director or officer and protects their personal assets if the company does not pay for their defense costs.

SIDE B

Side B coverage, also referred to as corporate reimbursement coverage, reimburses organizations when they do grant indemnification.?

This means when organizations cover legal fees and settlements on behalf of the director or officer being sued, their D&O insurance policy will reimburse the company and protect its assets. This coverage is often considered essential, as legal costs and settlements can be very financially damaging, even for large organizations.

SIDE C

Side C, also known as entry coverage, extends D&O insurance coverage for the corporate entity itself.

Side C coverage insures organizations for claims made directly against the company by providing coverage for defense costs and entity assets.

For public companies, Side C coverage is often limited to securities claims, but for private companies, Side C coverage can apply to a wide range of claims against the organization resulting from directors or officers failing to perform their role

3. Small Businesses Need D&O Too

Many businesses feel that they aren’t big enough to need D&O coverage, but the truth is that businesses of all sizes face lawsuits regarding how leaders handle company business. Even worse, if you’re a small business, the cost of a lawsuit can be a significant burden on the organization’s finances and personnel if you don’t have insurance to help you defend yourself.?

Also, small companies still want to attract talented directors, C-suite executives, and board members. That’s much harder to do if the leaders feel their assets may be at risk in a lawsuit. A solid D&O policy will provide assurance that they’re covered, making them more comfortable accepting the role.

Get the D&O Coverage You Need Today

D&O coverage can easily be tailored to your specific needs, whether you’re a large company or a small business. What’s important is that you protect yourself from the ever-growing number of lawsuits filed against today’s businesses.

To get the coverage you need for your leadership and your company, contact me today!

Call: 925 788 5558

Email: [email protected]