When most people think about executive liability they think board members.
“My organization doesn’t need director’s and officer’s insurance because we don’t have a board.”
D and O (directors and officers Insurance) also protects company executives. Whether you are a for-profit or not-for-profit organization, an executive liability package should be considered just as important as general liability.
What Does Executive Liability Cover?
Executive liability is a name commonly used in reference to a package of coverages including (but not limited to) director’s and officer’s (D and O), employment practices, and fiduciary liability.
Monica M. Minkel wrote a fantastic piece on Executive Liability for American Agent & Broker Magazine. Ms. Minkel does a wonderful job outlining the risks that are included in each piece of the executive liability basket and how those risks pertain to specific coverage. I encourage you to take a minute and read her article.
The essence of the piece is that executive liability covers a heck of a lot more than just not-for-profit organizations and their directors and officers. Small, private business should be considering this coverage like they do general liability and professional liability.
Why Is Executive Liability Important?
The quality of your board members and executive leadership is just as (and in many cases more) important than the quality of your staff, in the case of not-for-profit organizations, volunteers.
Did you know that board members and executives can be held personally liable for the decisions they make when directing an organization? I’m fairly certain that the cream of crop board members and executives you want to recruit for your organization are aware of this risk.
In order to recruit and retain the best and brightest you need to be able to protect leadership in the event of lawsuit.
Disclaimer: I am not saying that purchasing executive liability is a lawsuit chastity belt. However, decisions are often made with the best of intentions and the worst of unexpected consequences. Doing your best to protect against these consequences is prudent.
Investors Want to Be Protected
Companies in the start-up and early growth phases are always looking for new funding to help expand operations. Venture capitalism and angel investment seem to be the new philanthropy these days.
Be aware that sound investors who intend to take equity in your business in exchange for funding are going to want to be protected against the decisions you make.
The basket of coverages included in executive liability provides the coverage they demand.
The rub is this: there are too many organizations exposed to this type of risk. Don’t fall prey to the, “We’re too small to worry about that,” excuse. No business is too small to be sued because it’s mismanaging invested dollars.
Call an experienced insurance professional today and find out where you are exposed to executive liability risk and what options you have to guard against a claim.
Protection Photo via Shutterstock