What Is D&O Coverage?
D&O is an acronym for directors and officers. Managers and others in high positions face unique threats from employees and third parties. People serving as directors or officers of an organization can make mistakes. Wrongful hiring/firing, discrimination, and breach of legal responsibilities are examples of mistakes that can result in a lawsuit. You can purchase insurance premiums to protect your directors and officers from such individual liabilities.
D&O insurance covers class-action lawsuits raised by employees and third parties. Such insurance can help you attract high-level executives when new positions open up. D&O claims vary depending on the type of company/business, applicable laws, and details of the allegation. The definition of breach of responsibility also differs based on managerial positions. D&O insurance covers the risk of a lawsuit and protects your executives from personal losses.
How D&O Coverage Works for Commercial Property
High-ranking executives aren’t immune to making honest mistakes and wrong judgments. D&O insurance can cover wrongful legal actions made within the officer’s job capacity. This insurance won’t cover illegal activity or any activity outside the range of a director’s capacity. You need other policies, such as general liability or errors and omissions coverage to protect what D&O insurance leaves out.
A standard D&O insurance protects individual board members and officers from the costs of legal action. The insurance also protects the company, allowing the director to continue performing assigned responsibilities. The risk of financial losses for directors and officers can be lower if you have adequate D&O insurance. Here are some situations where D&O coverage is useful:
- A director of a publicly traded company makes a decision that causes financial losses for shareholders. The shareholders can sue the director for improper business techniques.
- A director signs off to terminate an employee who then sues the company for wrongful termination.
- A CTO unintentionally fails to disclose owning stock in a small company that stands to benefit from its employer’s success.
D&O coverage is part of commercial property insurance that pays for defense costs and losses incurred in a covered claim. The insurer may also cover financial losses and settlements if the case is lost. Executives without coverage have to pay for the defense cost and financial losses out of pocket.
Scenarios D&O Coverage Can/Can’t Respond To
D&O coverage can respond to various scenarios and claims, including those alleging hostile work environments, discrimination, and gender pay gaps. The coverage also responds to claims of intellectual property theft and poaching of customers or employees from other companies. Your directors and officers may also breach fiduciary duty and cause financial losses or insolvency. Other claims include mismanagement of cyber risk exposures.
Misrepresentation of investment information and distortion of company assets are also within the coverage of D&O insurance. Common D&O risk scenarios include shareholder actions, reporting errors, creditor claims, competitor claims, HR issues, and corporate manslaughter.
D&O insurance doesn’t cover fraud, intentional criminal acts, illegal remuneration, or claims under previous policies. Uninsurable fines and penalties are also left out.
Commercial Property Insurance for Restaurants & Nightclubs
If you own a restaurant, bar, or nightclub, you need adequate insurance to protect your commercial property, executives, and employees. Purchasing D&O coverage will protect your managers, directors, officers, and other high-ranking executives. You can also protect your tangible assets, business income, and payrolls. Working with a leading insurance provider is the best solution for comprehensive coverage. You can customize coverage to fit your needs.
The first thing you need to protect is your business property and assets. You can purchase commercial property insurance, which covers the building, business property, inventory, and business interruption. Other policies, such as BOP (business owner’s policy), combine commercial property coverage with general liabilities and business interruption insurance. You can also buy coverage for liquor liability, errors & omissions, and worker’s compensation.
Choose the combination of policies that’s right for your business.