Protection Against Fiduciary and Professional Liability Risks

Building and maintaining a successful business requires a combination of many different factors. This includes hard work, a dedicated staff of employees, a certain amount of talent, and good management. You might want to throw in some luck and good fortune as well. But don’t rely too much on luck, and instead focus on getting the right insurance policies, such as Management Liability Insurance. These policies can really help your business to avoid the type of risks and exposures that often come with doing business in today’s often-unstable environment.

Individual directors and officers of many privately held companies possess much of the same duties and fiduciary obligations to shareholders, much like their counterparts working at publicly held companies. They may be even more personally exposed since they potentially have fewer resources available to them, both internally and externally. Given the level of risk assumed by your directors and officers, it is increasingly important that D&O insurance is procured to protect the interests of these individuals.

Protection not found in a General Liability policy

Unfortunately, not all entities share the belief that management needs additional insurance protection and may end up learning a costly lesson when directors and officers are forced to pay defense costs, settlement amounts, and/or judgments out of their personal assets. Even if the company indemnifies the directors and officers, the individuals may still be exposed should the company become insolvent, meaning that there is no insurance available.

Don’t get caught up in the belief that a General Liability policy will respond to management liability claims against the company and/or its directors and officers. This is unequivocally not the case. Some of the chief reasons for securing a policy is to protect the personal assets of the individual directors and/or officers, reimburse the company for the costs in defending corporate lawsuits, and insure against shareholder lawsuits against private companies for inadequate or inaccurate disclosure in financial reports and statements made in private placement materials.

Management Liability Insurance will also guard against lawsuits alleging bad business decisions and protect your staff from lawsuits alleging a breach of fiduciary duty made by directors and officers that negatively impact the finances and operations of the company. You’ll get the added bonus of having a recruitment tool to attract qualified individuals to your Board and can bundle coverage with an employment practices liability policy to protect against rising litigation costs. Insurance that really provides protection.

Frank

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