No matter what industry a person works in, there are always unique risks involved in their daily operations. And with these various risks comes the need for different insurance coverages. In corporate America, one such insurance coverage that is a necessity is Directors & Officers Insurance, a comprehensive package that protects a company's executive staff from risks, including harassment and discriminatory practices.
If you've never heard of this insurance or are wondering if you should invest in a D&O plan, read below to learn more.
Directors & Officers Insurance: An Overview
Also known as D&O insurance, this policy focuses on protecting officers, directors, and other high-ranking officials in a business from legal action by other individuals, including vendors, investors, employees, competitors, and customers.
The legal action is typically carried out because the director or officer in question has been negligent or discriminatory. This could also pertain to these persons allowing or participating in wrongful acts, such as allowing the use of wrong information, not complying with regulations, or allowing the use of discriminatory practices.
The D&O insurance industry has witnessed a lot of action in recent years, especially in the wake of the #MeToo movement. According to Woodruff Sawyer's 2019 Mid-Year DataBox Update report, plaintiffs filed 217 securities class action cases in the prior year. The process of investigation for the claims requires a lot of time, work, and money. Even for a settlement, the payout amount can be high. In most cases, it can leave a business financially ruined. But with a Directors & Officers insurance plan, companies don't have to endure the financial losses they may face in a claim.
Special D&O Considerations
Directors & officers insurance policies can take many different forms, depending on the organization and the risks it faces per its industry. Businesses should work with insurance companies with proven experience and desirable results in this specialized field, such as Axis Insurance Services. Policies can cover a group of individuals rather than the individuals themselves.
If a company fails to disclose material information, the insurance company they work with may avoid payment due to misrepresentation. Policies can insure against the liabilities above, but they generally make exclusions for fraud, illegal profits, and criminal activity.
Does Your Company Need D&O Insurance?
It's not a law to have this insurance in place, but it does provide more benefits to companies looking to limit financial and legal exposure. The numbers of lawsuits in this field continue to rise, so it's best to be proactive about protecting the company's executives and its reputation.
D&O insurance provides more focus on personal accountability and respect toward all employees and customers. What's more, any business experiencing growth should consider this coverage as it opens up more room for risk.
As a business grows, more areas need to be covered and addressed correctly. Data protection and healthier employment procedures are two significant risk factors for a company and areas that directors and officers insurance can protect. While it would be great for all D&O claims to be mitigated, limiting the impact of these risks through this insurance is just as important.
About Axis Insurance
At Axis Insurance Services, we aim to help our customers identify their exposures and protect themselves. Founded in 1999, we offer insurance programs to a wide variety of professionals and industries including attorneys, real estate, healthcare, architects, and more, and also have a wholesale division. We pride ourselves on offering flexible insurance coverage tailored specifically to each customer’s needs. To learn more about our solutions, contact us at (877) 787-5258 to speak with one of our professionals.
