Do you know that you could be sued by your competitor for recruiting and hiring their employees? Lawsuits targeting executives and board members are becoming common.

Believing common myths about Directors' & Officers' (D&O) insurance puts you and your most valuable team members at risk.

Myth #1 - You don't need D&O insurance if you're a closely held private business.

D&O insurance is not just for protection against shareholder lawsuits. D&O claims can come from customers, regulators, creditors and competitors. Common complaints include breach of fiduciary duty and failure to exercise due care.

Myth #2 - Directors and Officers aren't exposed to personal liability because of their actions with respect to the company's business interests.

Chances are your organization's general liability policy doesn't include personal liability coverage for your directors and officers. D&O insurance is necessary to protect the personal assets of executives as well as the assets of their spouse.

So how does D&O protect employees?

There are usually three insuring clauses in a D&O policy. They are commonly known as Side A, Side B, and Side C.

  • Side A protects the directors and officers from personal loss if the corporation is unable to indemnify them.
  • Side B coverage reimburses the corporation for amounts that it is required to pay directors and officers for indemnifiable claims.
  • Side C covers the entity itself, usually for securities claims.

To sum it up, you don't need shareholders to need D&O coverage! A D&O policy may be the only thing standing between your organization's directors and officers and personal asset impairment, in the event of a lawsuit. Take the time to talk to your insurance advisor to make sure you have the coverage you need.