Small Business Liability Insurance

Epli Insurance

Protect Your Neck With Directors And Officers Insurance

Protecting yourself and your company with directors and officers insurance always makes financial sense. We live in world obsessed with litigation, and only authentic directors and officers insurance can shield your company from massive losses if a director or board member is sued. D&O insurance is just another form of smart financial planning.

What is D&O Insurance?

Directors and officers insurance, or D&O, is a type of liability coverage insurance that covers the legal fees of corporations and corporate board members in the event of a lawsuit or claim.

Directors, officers, and board members are expected to administer due diligence  and care in making corporate decisions. They are required to put the interests of the company above their own. The majority of corporations and their leaders operate their boards with integrity, because that is what is most conducive to business. But that doesn’t stop trigger-happy disgruntled employees from making claims.  Employment Practices Liability or EPLI can provide coverage if employees sue their employer for Civil Rights violations or some other wrongful firing or hiring practices.

Derivative Lawsuits and Third Party Lawsuits

Regardless of whether a lawsuit has merit or not, it’s obvious that directors and officers of companies are sued often. Generally, there are two major types of lawsuits filed against them: derivative lawsuits, or third-party lawsuits.

Usually, shareholders or other persons with interest in the company file derivative lawsuits. These lawsuits are filed ostensibly “for the good of the company.” Often, the plaintiff will accuse the director of mismanaging assets, being negligent, or defying company protocols.

Third party lawsuits are filed usually by persons not connected to the corporation. These lawsuits often seek monetary damages claiming that the company was mismanaged and caused them a financial loss.

Build A Kitchen Sink Policy

D&O insurance can protect from damages that arise from either type of claim.  A D&O Policy can protect a companies directors by reimbursing them for damages that the company cannot indemnify them for.  The D&O policy can also reimburse the company indemnified claims that are covered on the policy.  The policy can also be tailored to only cover derivative claims against an organization if they are a publicly traded company.

It’s important to realize that D&O coverage will not protect against errors and omissions made by your company. Nor will it cover lawsuits made by employees who claim that the company has violated their legal rights. Companies seeking these types of coverage should look into E&O and EPLI insurance.

Play It Big

Small and midsize businesses should carefully consider purchasing D&O insurance. These companies are the most vulnerable to lawsuits. In fact, a single  lawsuit can completely drain a midsize business’s finances. Law firms, accountants, technology companies, financial brokers, consultants, and many other companies can benefit from proper coverage.

Derivative suits are notoriously expensive. In fact, BroadCom recently settled a derivative suit to the tune of $118 million!

Nowadays, a D&O policy is a necessity for any company that wants to protect itself from vicious lawsuits. It is vital that you consult with an expert in D&O insurance to insure that you and your company are covered properly.

A good D&O policy will keep your company secure when and if you have to fight.

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what is employment practices liability insurance (EPLI) ?

It is kind of self-explanatory. It is insurance that protects the employer from claims resulting from various improper employment practices.

Some examples would be:

Age, gender and other forms of discrimination
Invasion of privacy
Improper interpretation of employment regulations
Sexual harassment
Slander or libel
Mismanagement of employee benefits programs
Negligent hiring, promotion and compensation decisions
Breach of employment contract
Emotional distress/mental anguish
Wrongful discipline and termination
Failure to properly train or supervise

This list is not intended to be all-inclusive and may vary by state and company. It is these types of exposures that an EPLI policy is for.