D&O Insurance for Private Companies
Like public companies, private companies can fall victim to lawsuits that impact the business, its officers and its board. D&O insurance is a must.
April 6, 2023
With today’s emphasis on corporate transparency and accountability, an organization’s directors and officers face countless exposures. Regardless of your company’s size or mission, the legal costs associated with a lawsuit can be crippling for both the organization and your directors and officers.
Many wrongly assume that directors and officers (D&O) insurance is only necessary for publicly traded companies. However, privately held organizations can just as easily fall victim to lawsuits that can impact the company, its officers and its board, making D&O insurance a must.
How D&O Insurance Helps Private Companies
D&O insurance can provide the following benefits to privately held companies:
- Coverage for manufacturing or production flaws. One of the key features of product liability insurance is its coverage for manufacturing or production flaws that cause unsafe defects in the product.
- Legal cost reimbursement. In the event of a claim, D&O policies can provide legal cost coverage for a variety of claims. Specifically, D&O insurance can provide reimbursement to leaders of private companies following allegations of wrongful acts, financial mismanagement, errors in judgment and negligence. Because D&O lawsuits can occur without warning and easily reach six figures, private company leaders must arm themselves with the right policy.
- Peace of mind. D&O claims can come from a variety of sources, including employees, clients, contractors and government bodies. For private companies, claims from creditors and competitors are particularly common. D&O insurance ensures that private company leaders are protected regardless of where claims originate, providing timely and effective coverage.
- An improved ability to attract new directors. Simply put, having a strong D&O policy in place makes board seats more attractive. This is because purchasing insurance shows prospective leaders that you take D&O risks seriously and are prepared to protect them in case of a claim.
- Coverage for regulatory exposures. Regulatory agencies are increasing their scrutiny of private companies, making D&O insurance all the more important. Paying the cost of an attorney to defend a director or officer against a government enforcement action is expensive, and private company D&O insurance policies can help with these types of expenses.
Learn More About D&O Insurance for Private Companies
Related Reading: How to Strengthen Your Employment Practices Risk Management
The above information does not constitute advice. Always contact your insurance broker or trusted advisor for insurance-related questions.
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