Directors & Officers

Directors and Officers can be targets for legal action, due to the decisions they make and also simply because of their status.

  • Not only do public companies have this exposure, but private companies also face similar risks, and the size of the organization does not matter.
  • Any private company can be sued by employees, shareholders, investors, customers, competitors, creditors, vendors, and/or suppliers.
  • According to Tillinghast-Towers Perrin D&O surveys:
    • Claimant distribution against private companies included 33% employees, 28% other third parties, 25% shareholders, and 10% competitors.1
    • Defense costs can be significant, with a median amount of over $44,000 (and an average of more than $800,000).2
    • Private company D&O claim frequency and susceptibility have been relatively stable over time, but remain higher than they were in 2004.3
  • The costs mentioned above would be difficult for many private companies to sustain. And, in some cases, without the proper D&O insurance, individual Directors and Officers could have to pay for those defense costs out of their own personal assets.

PRF through C.N.A. provides:

  • Side A Coverage for Directors and Officers for non-indemnifiable loss resulting from a claim for a wrongful act.
  • Side B Coverage reimburses the entity for indemnifiable loss resulting from a claim against Directors and Officers for a wrongful act.
  • Side C Coverage helps protect the entity.

Common D&O allegations include:

  • Failure to perform appropriate due diligence when making an acquisition.
  • Breach of duties under applicable securities or other statutory laws.
  • Careless management strategy that causes bankruptcy.
  • Misstatements or omissions regarding potential future performance of the company to minority investors.
  • Misrepresentations or errors regarding the financial health of the organization to a customer, vendor, or creditor.
  • Conflicts of interest when considering personal motives vs. interests of the shareholders.
  • Competitor lawsuits for tortious interference with business relationships.

Exposure to D&O Liability is not unique to any one particular industry.

Lawsuits have been filed against private companies operating in many different industries including but not limited to:

  • Manufacturing
  • Wholesale
  • Construction
  • Business Services
  • Technology
  • Transportation
  • Personal Services
  • Agriculture
  • Communications