Companies that operate with a board of directors and officers have management liability risks that can have a substantial personal financial impact on those board members and any other senior executives, as well as the company itself.
The structure of Management Liability Insurance has changed dramatically in recent years and this fact makes it necessary to understand the basic insuring agreements or contracts and examining each section-by-section to have a full understanding of what is being insured. An insurer possessing management liability professionals that are highly experienced at structuring programs can provide your company with the highest level of protection that you’ll need.
Parties often named in lawsuits
Corporate directors are often sued individually for acts that they perform, or fail to perform, or decisions they’re responsible for while in service. If a party alleges that the corporate leadership harmed the organization (or even another individual) in the course of managing financial affairs or establishing policies, any resulting legal fees and potential judgments or settlements can devastate the organization as well as those individuals involved.
As an example, if a member of a charitable or non-profit organization alleges a financial loss as a result of a director’s breach of the duty of care, or loyalty to the organization, he or she may seek damages in a court of law. Employees, governmental entities, competitors, or creditors may also allege negligence or some other form of a breach of duty.
D&O Management Liability Insurance policies were developed to protect organizations and their directors and officers against many of these types of potential losses. However, it’s important to understand that the reality is that the organization’s D&O policy may not be the only coverage you need to consider to adequately protect the personal assets of those involved parties.
There are limits of liability on any D&O policy belonging to all covered persons and entities combined, and this applies to all claims honored during the policy period, including any defense costs incurred to defend those claims. When the limits have been exhausted by payment of defense costs, settlements or judgments related to one or more claims during the policy period, there is nothing left for any subsequent claims. Speak to an agent familiar with D&O insurance about any questions you may have.