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So you’ve entered into a partnership agreement for a new project, acquisition, or entity and are reviewing your insurance needs in relation to this new partnership.

Along with the establishment of a board of directors, or even basic partnership comes some additional risk factors to consider, as the ‘control’ of the operation gets spread out among different members and parties, each highly responsible for a different aspect of the enterprise. In addition, upholding your responsibility to investors and shareholders presents an exposure for a potential D&O Liability related situation, as expectations are vital to sustaining these relationships.

Director’s & Officer’s Liability is a type of Management Liability that responds to the following types of claims, and is typically always excluded from General Liability coverage on a package policy you have. It is designed to protect both the personal assets of the members and your firm’s assets (whether for profit or non-for-profit, publicly traded or privately held) from situations arising out of officer/partnership operations.

A few main coverage areas of Director’s & Officers Liability are...

  • Monetary settlements for negligence or breach of fiduciary duty, loyalty or care to the attention to the organization
  • Claims for civil, criminal, judicial, administrative, and regulatory or arbitration proceedings and investigations
  • Mismanagement of Assets
  • Business decisions yielding unfavorable results
  • Antitrust and unfair trade claims

It is also vital to re-review and assess your needs every few years as the company grows, as the risk level for a D&O related claim increases over time. The following markers are especially smart times to re-assess the needs of your organization from a risk mitigation perspective, such as:

  • Raising capital
  • Expanding work force/staff or entering into 3rd party contracts
  • Acquisitions
  • Downsizing
  • Loss of a key executive
  • Increase in regulatory oversight

Since Directors & Officers policies can vary vastly from insurance carriers, it is recommended that you discuss with your insurance broker in detail all facets of your organization- specifically providing entity agreements/bylaws, illustrating all persons involved inclusive of third parties engaged with, so to be sure that this essential piece of your insurance portfolio is properly crafted to meet your needs full circle.

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