It is important to adequately insure directors and officers for private companies. These policies protect against lawsuits that arise as a result wrongful conduct by executives and are usually part of a larger risk management strategy. They offer several advantages for private firms.
Reduce Litigation Costs
Lawsuits have almost become a standard cost of doing business. Nearly every company will face allegations at some point. The common misconception is that D & O policies are primarily for publicly traded corporations, but private firms may end up being sued as well. They should be prepared to defend themselves against the expense of meritless claims. Most policies cover legal fees and settlements that might otherwise bankrupt the corporate officers or damage the financial stability of the firm.
Freedom to Act
Your company’s management needs to be able to act with confidence. It is more difficult for executives to make complex choices with the fear of legal ramifications hanging over their heads. With a properly structured D & O policy, they may act more confidently. When free to focus their attention on the needs of the business, their time is better spent making profitable decisions.
Benefit for Top Level Managers
In some instances, a director is not automatically indemnified against liabilities. Having a robust D & O package is an incentive for senior level executives. In addition to other compensation, these benefits are attractive to skilled experts with leadership abilities needed to run successful companies.
Many different policy options exist to insure directors and officers for private companies. Speak with an agent to find out what level of coverage best fits your organization’s needs.