Directors & Officers (D&O) Insurance
With today’s emphasis on corporate transparency and accountability, an organization’s directors and officers face a countless number of exposures. Regardless of the company’s size or mission, the legal costs associated with a lawsuit can be devastating for both the organization and its directors and officers. \
Many private organizations don’t believe they need directors and officers (D&O) insurance. This can be dangerous thinking, as just one D&O claim can drain the personal assets of a company’s leadership team.
The current litigation climate for private companies presents an unending and potentially devastating challenge. Following a financial crisis, error, business interruption or similar incident, management can be held liable. Without the proper coverage, directors and officers would have to face claims brought on by competitors, customers, business partners and regulators on their own, likely with minimal success.
Benefits of D&O Insurance for Private Companies
- Legal cost reimbursement — D&O policies can provide legal cost coverage for a variety of claims, such as allegations of wrongful acts, financial mismanagement, errors in judgment and negligence. Because D&O lawsuits can occur without warning, it’s critical that private companies arm themselves with the right policy.
- Peace of mind — D&O claims can come from a variety of sources, including employees, clients, contractors and government bodies. For private companies, claims from creditors and competitors are particularly common. D&O insurance ensures that private company leaders are protected regardless of where claims originate, providing timely and effective coverage.
- An improved ability to attract new leaders — Simply put, having a strong D&O policy in place makes board seats more attractive. Purchasing insurance shows prospective leaders that the company takes D&O risks seriously and are prepared to protect them.
- Coverage for regulatory exposures — Regulatory agencies are increasing their scrutiny of private companies, making D&O insurance all the more important. Paying the cost of an attorney to defend a director or officer against a government enforcement action is expensive, and private company D&O insurance policies can help with these types of expenses.
To learn more about D&O insurance and other ways to keep your organization’s leadership team safe from litigation, contact one of our insurance professionals at 410.897.5800.
Wealth and Insurance products are not FDIC insured, not guaranteed, and may lose value.
Sandy Spring Insurance Corporation is a wholly owned subsidiary of Sandy Spring Bank.
This material is provided solely for educational purposes and is not intended to constitute tax, legal or accounting advice, or a recommendation for any particular transaction.