Whether your business is a public or private corporation, association or any other organization like a nonprofit, decisions are being made by a few people regarding your current activities or future ones. Unfortunately, officers, directors and employees can be sued by state and federal authorities, donors, investors, lenders, vendors, customers, competitors, consumer groups and many others simply because they disagree with these decisions. In fact, the entity itself could sue its own current and former directors and officers. These suits could revolve around inaccurate financial information given to others, breach of fiduciary duties by paying excessively large salaries or bonuses, or a disagreement in how the bylaws allow and authorize certain activities of the board. These can be serious and incur tremendous costs to any organization.
Directors and Officers policies vary significantly from one insurance company to another. Since most of these policies are “claims made and reported”, the trigger of coverage and when it occurs can have an important impact on how this coverage responds to these suits. Many times, we find boards of Homeowner and Office condo associations clueless about the intricacies of these policies not even knowing that claims occurring from decisions made prior to a retroactive date are not covered. Unfortunately, it is at the time the suit is filed that they learn of this ugly development. To their board’s defense, most agents mishandle this issue and do not understand the complications of this product. Nor do the property management firms who step into areas that are reserved for licensed agents. How can this be? Lack of experience or simply the lack of knowledge. We at Carolina Insurance Solutions (CIS) look forward to having these discussions. Does the policy cover both monetary and non-monetary claims and relief? Is the definition of a “wrongful act” broad enough to handle all the activities done on behalf of your business? Are defense costs paid within the limit offered on our policy or in addition to this limit? Is Personal injury from discrimination covered? Are you allowed to select the counsel that will defend you? How does your current coverage respond to innocent directors having severability rights in case they are sued for actions not involving them? Does your policy exclude the failure to maintain insurance suits? Can you purchase coverage for previous decisions made your business even though you did not have D & O coverage? If you don’t know, you need to know. Let us take a look at these important issues for you. A second opinion on these key questions should not be left unanswered and discovered only at the time of a claim.