Many private organizations don’t believe they need directors and officers insurance. This can be dangerous thinking, as just one D&O claim can drain the personal assets of a company’s leadership team. In reality, the benefits of D&O insurance for private companies are hard to overlook.
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.
In addition to the general benefit of protection, private companies can benefit from D&O insurance in a number of ways.
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Legal cost reimbursement— D&O policies can provide legal cost coverage for a variety of claims. Specifically, D&O insurance can provide reimbursement to leaders of private companies following allegations of wrongful acts, financial mismanagement, errors in judgment and negligence. Because D&O lawsuits can occur without warning, it’s critical that private company leaders 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. This is because purchasing insurance shows prospective leaders that you take 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 is 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.
Learn more about the benefits of D&O insurance for private companies, the unique liability risks and even how to get coverage with HRO Resources.