A policy that protects directors and officers for private companies typically covers the costs of a legal defense, investigations and settlements.
Lawyer’s fees and court costs quickly add up. For complicated cases, it can take months or even years to reach a final decision. Defending against a legal claim can still be expensive regardless of any fault found. In a case involving allegations of wrongful acts by a firm’s officers and directors, these costs may become the responsibility of the individual managers themselves. This liability insurance provides managers with the legal defense they need and allows them to continue focusing on their responsibilities.
An allegation must be proven to have any legal significance. While some forms of evidence may justify a filing, a thorough investigation is often necessary to prove a claim. These investigations may include expert testimony, witness interviews and a review of past records. While this research may be critical for a defense, costs quickly escalate. Protection under a D & O policy often includes provisions for the expenses of investigations.
In some instances the settlement and negotiations are covered by the policy. An amount determined to satisfy the wronged party is paid up to the policy’s limit. In instances where officers and directors are not specifically indemnified, this protects the personal assets of the firm’s top level managers. It also helps to reduce the costs the firm incurs as a result of a judgment or settlement.
It is important to have a properly structured policy specifically designed to meet the needs of directors and officers for private companies. Speak with a licensed agent to create a plan for your company.