Directors and Officers Insurance in New York City
With claims of misappropriation of technology, improper payments, cyber and privacy issues, fiduciary responsibility, business and nonprofit directors and officers face significant lawsuit exposure. When they do occur, these suits can result in millions in civil penalties, not to mention the cost and headache of a defense. It’s the rare director who would put their personal finances on the line for your business. Your board is one of your most valuable assets – why wouldn’t you protect them with D&O coverage?
What is Directors and Officers Insurance?
Also called D&O insurance, this is a type of liability insurance designed to protect the personal assets of your board of directors and company officers in the event they are sued for actions or decisions made in their capacity as directors and officers. Generally, it is used in claims resulting from managerial decisions that have adverse financial consequences. It can cover attorney fees, court costs, settlements and judgements in cases of discrimination, defamation, and mismanagement of funds. Coverage can also extend to defense costs arising out of criminal and regulatory investigations/trials.
How it helps your business:
- Most board members expect this protection, so having D&O can help you recruit high quality people – and keep them.
- Insurance helps your board focus on the task at hand (your business!), not worrying about exposure.
- Gives venture capital investors confidence to invest in your company.
26% of private companies report experiencing a D&O loss in the last 3 years, with an average reported loss of $387,000. The largest reported loss was $17 million!
Who needs D&O Insurance?
It’s not just for big, publicly traded companies with shareholders: any company or nonprofit with a board of directors helping run operations is at risk. Your board can be personally sued over their performance as a board member or management of company affairs with lawsuits from employees, customers, investors and others. Without D&O, your board members would be personally at risk. That’s a risk many won’t take especially in New York where lawsuit demands can be higher.
D&O coverage can be written to cover directors and officers of:
- for-profit businesses
- privately-held firms
- educational institutions
But with terms like A-side coverage, Duty to Defend and Claims-Made Coverage Trigger, we know this coverage can get confusing quickly. We’ll walk you through it and help you understand where your risks are, and just as important, where they aren’t.
You might think your small business isn’t on anyone’s litigation radar, but:
There have been more than 1,500 D&O claims every year since 2010. More than 60% were directed at nonprofits.
Why do I need D&O Insurance?
The Enron scandal ushered in an era of ever-increasing financial scrutiny and federal and state regulation on the entire business spectrum, not just listed corporations. It’s only natural your board is concerned about the critical issues they’re discussing and voting on, such as data breach reporting. D&O coverage protects your board from possibly tens of thousands of dollars in legal costs, plus the hassle of defending themselves in case of a lawsuit. Judgements can lead to millions in civil penalties, not to mention attorney fees, punitive damages, reputational losses, and business interruption. D&O defense and investigation costs alone can range from $300,000-$700,000.
The impact of D&O losses on private companies is widespread:
96% report Financial loss
42% report Loss of productivity
36% report Negative impact to morale/company culture
31% report Negative impact to brand reputation