Coverage Under Directors and Officers Insurance
The type and amount of directors and officers insurance depends on the specific needs of a Long Beach company and can include coverage for legal fees, attorney fees, and damages awarded to the plaintiff. It is important to ensure that the policy maximum is high enough to meet the fees that may be incurred, not just the damages that may need to be paid. Directors and officers insurance policies can be setup with three different coverage terms:
• A-side offers coverage to individual directors and officers who are not indemnified by the company. It covers the legal costs for the individual(s)
• B-side provides coverage for already indemnified directors and officers, but this type of policy does not provide compensation to the company itself for any cost it incurs as a result of the lawsuit.
• C-side can cover the corporation itself if it is also named in a securities claim along with its officers and directors.
Many companies purchase policies that include A-side coverage with C-side coverage, or B-side coverage with C-side coverage. This is dependent upon whether the directors and officers are indemnified by the company. Check with your trusted Long Beach insurance broker to determine which coverage best suits your company.
Lawsuits and Directors and Officers Insurance
Board members and executives are in charge of overseeing many different management activities within a company. Occasionally a misstep can be made that may put the company in jeopardy of a lawsuit. Noncompliance, negligence, conflicts of interest, and hiring and firing assessments are just a few of the mistakes that can be unintentionally made by a director or officer that can result in a lawsuit. Shareholders are often the plaintiffs in a case, but employees and the company itself can also file lawsuits again the board. If a specific board member or executive is responsible for overseeing the error, a lawsuit can be brought against that individual instead of the company as a whole. Directors and officers insurance can protect that individual from taking the brunt of the lawsuit.
Exclusions and Differences in Directors and Officers Insurance
Long Beach companies may think their directors and officers are covered by general liability insurance. However, general liability insurance only covers failure in activities regarding products or services. It does not cover negligence by a director or executive. Directors and officers insurance policies do not cover bodily harm, property damage, or slander. Those are covered by general liability insurance. Companies with officers and directors should have both types of insurance to ensure they are properly covered.
Directors and officers insurance excludes claims where the individual intentionally committed a wrongful act against the company or its shareholders. Fraud, embezzlement, and insider trading are not covered under a policy.
If your company needs to purchase directors and officers insurance or you just want to compare available policies, consult with a Long Beach directors and officers insurance specialist to review your options by calling 562.498.8661 or visiting www.KellyWilliamsIns.com.