Remember the recent scandal with Rupert Murdoch and phone hacking? As an officer of New York-based News Corp., chances are he is covered by D&O insurance. There’s only one problem. According to the GT Alert article “What You Need to Know About D&O Insurance: Top Ten List,” writer Mark E. Miller, Esq., notes:
D&O policies routinely contain exclusions for criminal conduct, fraud, and illegal profit or advantage taken by the directors or officers.
Regardless of whether or not Murdoch has to come out of pocket for his legal fees, as a business owner you don’t want to. Instead, you’ll want to make sure that you as well as your directors and officers have insurance to protect against legal liabilities that arise from actions taken while working for your organization.
However, D&O insurance can get complicated. Miller explains there is no standard D&O insurance policy form, so language in these D&O insurance products can vary significantly. This variability can have an “immense impact” on the personal wealth of directors and officers.
Side A, Side B or Both?
Generally, D&O policies have two primary parts:
- Insuring Agreement A (Side A Coverage): Coverage for losses resulting from claims made against directors and officers.
- Insuring Agreement B (Side B coverage): Reimburses the firm for losses due to the indemnification of directors and officers.
Additional components can include items such as Entity Security Coverage (protects against securities claims), Employment Practices Liability (protects against employment-related claims) and Independent Director Liability (similar to a Side A policy, but it covers outside independent directors), just to name a few.
What D&O Insurance Coverage Do You Need?
What kind of coverage should you get for your directors and officers? Naturally, it depends on many things. However, the Towers Watson Directors and Officers Liability: 2008 Survey of Insurance Purchasing Trends, found that:
- 68% of participants in the survey had less than 100 employees.
- 60% of companies were privately owned, 25% were public, and 15% were non-profit organizations.
- 43% of public companies purchase Side A only.
- 45% purchased Fiduciary Liability coverage.
- 3% of all organizations purchased Independent Director Liability.
Less than 2% of companies with international operations purchase directors and officers insurance
for individual countries, relying instead on extended coverage from their current plan.
Whether your business is small or large, public or private, Helios Insurance can answer your questions and assist you with your D&O insurance needs.Contact us to find out more.