Common D&O Insurance Claim Examples

Posted By: Team Moody,

Have you thought about how well protected your company is from potential lawsuits? Maybe you are just now considering the implications of insufficient coverage against possible claims against your firm? No matter what area of industry your business belongs to or the clientele you serve, MD D&O insurance is essential.

“D&O” stands for “Directors and Officers.” They are the executives and board members of large companies, some of whom may own part of the business. They are primarily responsible for making business decisions, charting direction, and setting corporate policies. In any large firm, directors and officers are integral to the growth and development of the business.

Naturally, it is important to ensure that directors and officers are protected from liability risks resulting from carrying out their duties. This is where D&O coverage comes in.

D&O coverage is a type of insurance that covers your directors and officers against legal liabilities that may arise from their actions or decisions. With adequate coverage, directors and officers have the assurance of knowing that their finances and personal assets aren’t at risk even if the company faces a lawsuit.

Let’s take a look at some situations in which D&O coverage can be helpful.

Wrongful termination claims

Wrongful termination claims are pretty much par for the course with any large corporation. Most such claims are resolved to the satisfaction of everyone involved, and there aren’t usually any lasting repercussions for the employer or the employee.

But there are cases wherein wrongful termination claims are ruled in favor of the plaintiff. When this happens, the company’s directors and officers could be liable for financial and legal penalties.

But with D&O coverage, your executive leadership won’t have to worry about the fallout from a wrongful termination claim. Regardless of how the ruling goes, your executive team can rest assured that their assets aren’t in jeopardy.

Violation of workplace laws

Almost every business owner runs the risk of operating outside established legal boundaries. Whether due to ignorance of the law or an error in judgment, such offenses can have serious legal consequences for the people involved.

D&O coverage helps protect a company’s executive team from the legal repercussions arising from failure to comply with existing laws. It will also cover liabilities resulting from critical mistakes, lapses in governance, and other operational mishaps that may occur when running a business.

With adequate D&O coverage, your directors and officers will be protected from costly errors in judgment.

Investor lawsuits

Company directors and officers are accountable to investors in many ways. Although the executive team and upper management essentially run the company, they are responsible for meeting the expectations of those who invested money in the venture.

Unfortunately, there are times when companies fail to live up to these expectations. If investors don’t see the growth they expect or if the company veers off in a different direction from what was agreed upon, legal conflicts may erupt.

D&O coverage protects the executive leadership from suits filed by investors. This type of insurance can be especially crucial when companies are in financially dire straits, as it removes the burden of additional liabilities during a difficult period.

Alleged withholding of information

No company wants to be accused of withholding information. But there are times in any firms’ life when its directors and officers may be suspected of being less than transparent to serve their own needs. This could lead to a string of potentially devastating lawsuits, any of which could lead to the defendants’ financial ruin.

D&O coverage won’t necessarily spare your directors and officers from being accused of withholding information. However, it will help reduce the threat of financial and civil liability in the event of a lawsuit.

D&O insurance: Essential to your company leadership

No company is immune from the above mentioned scenarios. Of course, the likelihood of these legal issues occurring depends on the nature of your business and clientele. Nevertheless, it is prudent to exercise due caution and ensure that you are protected against any potential legal issues.

It is especially important to provide adequate legal protection to your company directors and officers. Your executive team shouldn’t have to worry about losing their homes, depleting their savings, or going bankrupt because of a claim that someone may file against your company.

D&O coverage is one of the best means of protection that you can offer. Providing D&O insurance as part of your benefits package will go a long way in helping keep your executive leadership satisfied and loyal to your firm. It will also help attract valuable new officers, which could have long-term benefits for your business.

About Moody Insurance Worldwide

Moody Insurance Worldwide, a division of Moody & Associates that was founded in 1914, is a leading provider of risk management programs and insurance coverage to individuals and businesses across the East Coast. We write all sizes of businesses, with technical expertise in many key industry areas, and provide personal insurance programs for estates and high net worth individuals. Our licensed, experienced commercial account managers can work with you to determine the coverage that you need at a competitive rate. Contact us today at (855) 868-0170 to learn more about what we can do for you.