RISKY BUSINESS
Insurance Info & Risk Management Tips By Hadley Wood www.hlinwood-insurance.com
Management Liability If you are an Officer, Director, Board-Member or Key Advisor in or to a company or non-profit, you may be surprised to learn that you have Personal Liability exposure that you may not be covered for. While the Company may carry insurance for the Company itself, it likely does not extend to you personally, if you are named as an individual in a claim or lawsuit. Let me explain – if a claimant can show that the Officers, Directors, Board or Advisors could have personally prevented the claim by mitigating a situation before damages occurred, the court can find the Company’s Executives personally and separately liable. It is a frightening scenario - especially if you are on the board of a Non-Profit and volunteer your time and efforts only to find out that you are at risk of losing your personal assets! Thankfully there is an insurance product called Directors and Officers Liability (aka D & O), which is a type of Management Liability Insurance. It is typically purchased separately from a normal General Liability or Professional Liability but is often bundled with Employment Practices Insurance (EPLI), which we have discussed previously. Common D & O claims include: • Negligent management • Breach of contract • Regulatory claims • Employment lawsuits • Antitrust claims • Inadequate disclosure in financial
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reports or statements • Breach of fiduciary duty resulting in financial losses D & O Claims also have cross-over into Cyber incidents and data protection. Because it is the responsibility of the key Directors of the company to protect the data, if there is a data breech, it can be pointed back to the Directors personally. With the average D & O payout over $400K and with many claims running into the millions of dollars, you can see why this coverage is personally important to you. Just the cost of hiring an attorney to defend yourself could bankrupt you as many of these claims take years to resolve. If you think you might have legal exposure in this situation, make sure to inquire whether the Company carries D & O coverage. You should request a copy of the policy to verify and see the limits and terms. If the Company does not carry this coverage, you should encourage them to get it in place to protect the key decision makers. And if they refuse to carry this, you need to make a serious decision whether you want to risk being a part of that Company. If you have any questions about Management Liability, D & O, Cyber Liability, or any other type of business insurance, please contact 760-828-0403 or visit www.hlinwood-insurance.com I want to thank each Veteran for their service and wish everyone a Happy Thanksgiving!