Directors and Officers Liability (D&O) insurance is a fundamental component of any company’s risk management programme. A lack of D&O insurance may deter talented individuals from seeking an executive position at your company, as they don’t want to put their personal assets at risk in the event of a legal action.
As a savvy business owner looking to protect your bottom line, how do you weigh the cost of insurance to protect your senior leadership with the potential risk of a legal action? As regulatory investigations and defence expenses increase, prices for D&O insurance have gone up as well. Corporate indemnification provides the first line of liability protection; but certain circumstances—most notably, if the company goes bankrupt—necessitates that additional protection is offered to directors and officers.
A variety of factors determine the price of a company’s D&O insurance. Some low-risk companies pay pennies on the pound; others pay a lot more, but they understand it’s a lot less than the expenses they’d incur in a legal action. Recognising the cost drivers behind D&O insurance—a company’s exposures, legislation and trends in D&O legal actions—can help you decide what cover your company needs to mitigate its unique exposures.
So What Type of D&O Cover Do You Need?
Your organisation’s unique attributes and risks will determine the extent of D&O insurance cover you need. The type of cover affects the cost, and it’s important to understand the different types of D&O insurance to determine what covers your risks. Policy options include:
Side A: This cover protects directors and officers when indemnification is not available. For example, if the company goes bankrupt during a lawsuit, this cover would protect directors’ and officers’ personal assets.
Side B: This cover reimburses a company’s indemnification obligations.
Employment Practices Liability (EPL): This cover protects directors and officers against wrongful termination, discrimination (age, sex, race, disability, etc.) or sexual harassment suits from current, prospective or former employees.
For more information on D&O cover options for your company, contact BC Underwriting today on 01444 810444.