Directors & Officers
D & O policies insure corporate directors and officers against claims, most often by stockholders and employees, alleging financial loss arising from mismanagement. The policies contain two coverage’s: the first reimburses the insured organization when it is legally obligated (typically by corporate charter or state statute) to indemnify corporate directors and officers for their acts; the second provides direct coverage to directors and officers when the organization is not legally obligated to indemnify them. In addition, a third type of coverage, known as entity securities liability insurance is usually available on an optional basis, for additional premium. Such coverage insures the corporate organization in connection with securities it has issued. D & O forms are written on a claims-made basis, generally contain no explicit duty to defend the insured’s, and typically exclude intentional/dishonest acts and bodily injury and property damage. Listed below are some D&O claim scenarios that explain how this coverage will protect your business.
Claim scenario 1: A mid-sized manufacturing firm hired an employee away from one of its competitors, bringing the person on as an officer. A year later, that new officer’s ex-employer sued the officer and his new firm, alleging that the officer misappropriated trade secrets and violated certain provisions of is termination agreement.
Claim scenario 2: A company enters into an investment agreement with a third party and agrees not to negotiate with other entity regarding financing or a potential acquisition for a two-week period. During the exclusivity period the company engages in negotiations with another investment group. The third party alleges breach of investment agreement and intentional and negligent misrepresentation.
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* Insurance varies by state and is NOT available in all states countrywide.