> > Director’s and Officer’s Liability Insurance |
Director’s and Officer’s Liability Insurance
Director’s and Officer’s (“D&O”) liability insurance now stands as one of the key components of what is called “corporate insurance”. Statistics show that around 95% of Fortune 500 companies provide this cover for their directors and executives. One of the most common reasons for this liability cover is the number of lawsuits brought against the officers of large corporations involving securities fraud brought about by the illegal manipulation of stock prices. Settlements reaching millions of dollars have made it obligatory for any private corporations to take out such indemnity to protect them against such events.
Liability claims generally fall into two categories: bodily harm and non-bodily harm, with the majority of claims being for the former. D&O liability insurance only covers non-bodily injury claims that include employment-related claims and the misappropriation of company funds. Two further sub-divisions include derivative lawsuits and direct (also called third-party) lawsuits. Derivative lawsuits are brought against board members or a corporation, normally for the mismanagement of securities or company funds. Direct lawsuits are brought by a company employee or someone outside of the company who claims some form of non-bodily damage. One common form of direct lawsuit is brought against a company for unfair dismissal from employment.
D&O lawsuits are most often aimed at wealthy company or board members in the hope that settlements will be reached with out-of-court payments being made to the petitioner. Such lawsuits are often successful with both parties normally keen to avoid lengthy and costly legal battles in the courthouse.
Many D&O policies are very expensive, and many are tied up with restrictive limitations. Companies purchasing D&O policies must pay close attention to who is covered, what type of lawsuits are excluded from the policy and what is the payment history of the insurance company that has underwritten the liability policy.
Following scandals like the Enron affair, large corporations are extremely wary of the risks that such large companies carry. Investigators are probing ever deeper into company archives and transparent accounting is now demanded by right. D&O liability insurance is likely to increase in prominence and cost as greater accountability of company officers is demanded and expected.
For more infomation on small business insurance choose from the list below. |
|
|
|
|
|
|
|
|
|
Banking - Business Finances - Economics - Insurance - Investing
Major Purchases - Personal Finances - Stock Market - Taxes
|
