Importance of D&O Insurance for Private Companies

management liability insurance

From small local businesses to multi-national corporations, management liability insurance protects board members, directors, and officers against claims launched by employees and other pertinent parties. Although suits against publicly traded organizations often make headlines, private companies are also highly susceptible. Directors and officers of small to medium-sized businesses are often involved in the day to day decision making of their firms, and they are most likely to be named in lawsuits. D&O claims can be devastating if the business owner’s net worth is tied to the financial health of the organization.

Management liability insurance is designed to protect the executive management team from claims originating as a result of their daily management decisions. Programs can be tailored to meet an organization’s particular needs and may include coverage for several common areas.

  • An individual claim limit as well as a cumulative limit.
  • D&O protects the assets of directors and officers.
  • Indemnification reimburses the organization for the cost of claims against the directors and officers when they are repaid.
  • Entity coverage protects the business if it is named as a defendant in the claim.

Virtually all programs are written on a claims-made basis, and an extended reporting endorsement is common. Confirming what types of damages are covered as well as those specifically excluded can help maximize protection for you and your business if a claim is brought.