Commonly referred to as E&O (Errors and Omissions) insurance, directors and officers liability insurance cover business directors and key officers against claims of alleged wrongful acts. Some of these wrongful acts may include wrongful trading, neglect, breach of trust, error, misleading statement and breach of duty.
With increasing strain on the global economy, stakeholders are much more vigilant about their investment and can go to extreme lengths to ensure that it is protected, including bringing charges against the directors and officers. This, among other reasons, puts directors and officers in a unique position as far as risk of claims being made against them is concerned.
If you own or are part of a company that has directors and key officers, then the answer is yes. Directors and officers are tasked with specific duties and responsibilities that affect a wide range of people from shareholders, investors, and regulators, to employees, customers, and third parties. Should any of these groups of people feel that the directors and officers have committed wrongful acts, they may have civil, regulatory and sometimes even criminal proceedings brought against them.
Without this E&O insurance, your company directors, and officers will be unable to effectively defend themselves against these claims. It is imperative that they are covered in order to do their jobs well while staying protected.
The E&O insurance covers claims made by regulators and creditors. It also covers them against employee discrimination claims such as unfair dismissals and harassment claims although this can be taken care of by a separate employee practices liability insurance policy.
The litigation expenses will be covered by insurance along with a reimbursement coverage, as your company will be required to pay damages or costs awarded by the court. In some cases, if there is no actual wrongful act as alleged against a director or officer, the coverage can include defense costs from criminal and regulatory investigations.
However, the directors and officers insurance policy does not cover claims made against the entire organization unless you add a company securities coverage that will cater to securities claims made against the company. It also does not cover intentional non-compliance, fraudulent or criminal acts by the directors or officers, or where they obtained illegal enumeration or acted selfishly for personal gain. Also not handled by the current policy and insurer are any legal actions already in place when the policy begins along with claims made under a previous policy or covered by another insurance company.
At Berliner-Gelfand, we will calculate your premium rates based on the estimated frequency and severity of the errors and omissions claims. We will also consider the size of the company, the value of its consolidated assets, and other factors affecting the potential pricing of a claim. These factors include:
Contact our experienced insurance agency to get a consultation and quote for your E&O liability coverage.