When Should Directors and Officers Be Insured?
As an agent with small to mid-sized businesses, you are likely aware of the many misconceptions that business owners have about insurance coverage; especially Directors and Officers Coverage. One of the biggest assumption executives make is that this coverage is only for publicly traded companies, and privately held companies don’t carry the same risk exposures. While this is for the most part true, a business does not have to have shareholders in order for the directors and/or officers to be sued.
So when should your directors and officers be insured? If they manage vendors and employees, or communicate with competitors and customers, as all directors and officers do, they should be insured! A lawsuit can come from any one of these parties, and directors and officers insurance will cover their legal fees, settlements, and other legal costs including damages or awards they must provide funds for.
According to a report published by Inc.com, a recent survey of decision-makers at 451 U.S. companies showed that 1 in 6 company executives believe their business will experience a D&O related loss in the next year. The Chubb-sponsored survey found that 1 in 8 survey respondents had experienced a loss of this kind within the past five years. The costs to settle and/or litigate? Close to 226,000 on average.
It’s important to reiterate to your clients how important this insurance coverage is. They should be informed of the different factors that contribute to the cost of D&O insurance, and how these costs compare to the costs of a lawsuit.
At PLRisk Advisors, we have the experience, knowledge, and markets to secure the policies your Directors and Officers clients require. To learn more about these coverages and see what other products we can assist you with providing to your clients, please contact us at (855) 403-5982.