What exactly is directors/officers insurance? It is coverage that has been designed to respond to claims arising from the numerous threats to companies and their management, including securities litigation, employment practices, fidelity or crime-related loss and fiduciary liabilities. Each of these areas can be extremely costly and even catastrophic in their claims and awards amounts and loss of revenue and client confidence.
Some of the most common claims against directors and officers insurance are for lawsuits claiming discrimination, wrongful termination, sexual harassment and retaliation. These types of claims against companies have increased 20%. Without insurance a company could be ruined with just one such claim. Our nation has the reputation to sue at the drop of a hat and the claims against corporations from just the employees can reach multi-million dollar judgments and settlements, which have increased by almost 200%. (EEOC)
For these and all other similar lawsuits you need to have a comprehensive directors and officers plan in place to not only set up good practices and train employees but also to have an insurer that can back you up with financial strength, litigation management, loss prevention and risk management services.
Another area that involves employees, directors and officers included, is theft of company assets and ideas. The average business loses around 6% of their total annual revenue to employee theft or fraud, which translates to $600 billion per year! With computers this type of theft can be devastating to not only the company involved but their clients too. Without insurance in place your company can literally be wiped out overnight. It is very important to have insurance coverage in place that adequately covers your company as well. Just look at all the different ways your business can be affected by dishonest employees.
- Stealing inventory
- Working with an outside vendor to steal
- Converting funds
- Collusion
- Dummy bank accounts
- False invoices
- Forgery
- Embezzlement
- Fraud schemes
- Robbery on premises
- Theft of customer/client information
- Formulas or patents stolen
An insurance plan for directors and officers will cover corporate directors and officers against claims, usually made by stockholders, alleging loss arising from mismanagement. These plans are available for associations, corporations, institutions and individuals.