Executive Risk and Directors & Officers Insurance (“D&O”)
The Directors and Officers (“D&O”) insurance segment has become a standard product for large corporations. Cover is necessary to enable decision-makers to act without the threat of personal liability constantly hanging over them. Instead of being forced to protect their livelihood by fighting each and every claim through the courts, this kind of coverage enables managers to settle these claims quickly and relatively discreetly. But even if an insurer ultimately might not cover a loss, D&O insurance will be useful because the defense costs for the claim can also be covered.
In today’s increasingly globalized markets, it is becoming more and more important to use a knowledgeable broker to select an insurer that can understand each legal environment in which the client is active, and the local policies need to reflect local conditions. Most importantly, the insurer needs to be able to manage claims worldwide and set up an international program which provides coordinated global coverage.
What is D&O Coverage?
D&O insurance policies offer liability coverage for company managers to protect them from claims which may arise from the decisions and actions taken within the scope of their regular duties. D&O cover was first conceived in 1930s by Lloyd’s, and after a long period of obscurity has spread rapidly throughout the industrialized world since the 1980s.
Such policies cover the personal liability of company directors and officers as individuals (Side A cover), but also the reimbursement of the insured company in case it has paid the claim of a third party on behalf of its managers in order to protect them (Side B or Company Reimbursement Cover).
Publicly traded companies can also obtain cover for claims against the company itself for a wrongful act in connection with the trading of its securities (Side C or Securities Entity Cover).
Who needs D&O insurance?
- Not-for-profit entities
- Publicly traded corporations
- Closely-held private companies with Advisory Boards
- Organizations contemplating an IPO
- Attorneys or other professionals using a LLC structure
Which industries need D&O coverage?
Any organization in any industry that has Directors, Advisors or other outside non-employees involved in decision-making should be speaking with a McLean Hallmark broker to arrange proper coverage; the individuals you wish to have advise you will want to know your organization values them enough to protect them from personal liability.