Directors & Officers Liability Insurance for IT Businesses
Directors and Officers Liability Insurance (aka D&O Insurance) is essential for
any company that relies on its assembled leaders to make decisions on how to spend
or invest company funds and which direction to take the business. If a stockholder
objects to the way funds are being spent, for example, that stockholder could sue
your directors and officers. Without D&O Insurance in place, your board's personal
assets would be on the line in the lawsuit. That's why it's often difficult to retain
top leadership talent without adequate D&O coverage - nobody wants a job that puts
their life savings at risk.
Your IT company
is responsible for purchasing D&O Insurance to help attract and keep your officers
and board members. The coverage may even protect you as the business owner if you
are sued for a D&O-related claim.
What is Directors & Officers Liability Insurance?
IT businesses turn to Directors & Officers coverage in order to safeguard their
board members, directors, and officers from lawsuits arising from management decisions
they made on behalf of the company. When an investment goes awry or they made a
poor management decision and are sued, the policy ensures they will not have to
pay out of pocket to defend themselves in court. Without the coverage, your IT firm
may have a difficult time retaining the most talented and capable professionals
for your board.
Your D&O policy may include coverage for:
- Misuse of your IT company's funds. Should your directors or officers make a misguided
decision that costs your investors, they could decide to sue your board for the
loss. Even if your board isn't liable, the cost of hiring a lawyer for a drawn-out
court case can cost tens of thousands of dollars.
- Mistreatment an employee. If one of your firm's employees names an officer in a
lawsuit for harassment, discrimination, or wrongful termination, D&O can cover the
claim through its included Employment Practices Liability Insurance.
- Failure to perform official duties. If a director of officer fails to fulfill the
duties of their position and that failure results in losses for a third party, they
could be sued. Fortunately, D&O Liability Insurance will kick in to cover the ensuing
court fees, legal defense expenses, and other claim-related costs.
Ask your TechInsurance agent
for more details about your D&O coverage options.
When Does Your IT Business Need D&O Liability Insurance?
As your tech firm grows, you may find it's time to assemble a board of directors.
But in order to give your company the benefit of these professionals' vision, expertise,
and management, you will need D&O coverage to attract and retain them. That's because:
- Most directors and officers who are candidates for your board will require the coverage
before they sign on.
- Investors, such as venture capitalists, may also require proof of Directors & Officers
Liability coverage as part of their conditions for investing in your company.
- Your company's employees expose your management to Employment Practices Liability
lawsuits, which can be covered by your D & O insurance.
When you are trying to grow your small IT business, D&O can be an invaluable asset.
Not only does the policy help account for common upper-level management risks, but
it also showcases your company's credibility and readiness to look after its talent.
Why D&O Insurance Benefits Your IT Firm
A board of directors offers your company new insights, strategies, and ideas for
how to grow your business, make investments, and manage your employees. But if you
don't have Directors & Officers Insurance, you run the risk of not being able to
attract the talent you need to run the board. Candidates may fear their personal
finances would be at risk if they accept the position and your company doesn't have
the coverage that protects them from lawsuits over how they do their job.
D & O Liability Insurance also benefits your business because:
- Claims from stockholders, employees, and clients will be made against the company
as well as the directors of the company.
- Investors and members of your board of directors will not want to put their personal
assets at risk just to work with your company.
- Employment Practices Liability suits constitute the largest portion of claims for
D&O policyholders. More than 50 percent of D&O claims are Employment Practices-related.
Wondering if D&O is a good fit for your risk management plan? Talk to a TechInsurance agent today.
D&O Insurance for IT Businesses: Key Considerations
Here are some other details to keep in mind as you shop for Directors & Officers
D&O Insurance Includes Employment Practices Liability Insurance.
Over 50 percent of D&O claims are related to the Employment Practices Liability
portion of the policy. This is the part of your coverage that protects your company
from lawsuits alleging that your officers, directors, or managers violated certain
rights. These claims may include:
- Mismanagement of employee benefits
- Wrongful termination of employment or an implied contract
- Wrongful discipline or demotion an employee
- Sexual harassment an employee
- Slander or libel
- Discrimination based on age, gender, religion, race, or other protected statuses
- Breach of an employment contract
- Invasion of privacy
- Emotional or mental distress
- Negligent decisions concerning hiring, promotions, or compensation
To learn more about Employment Practices Liability Insurance, check out our EPLI product
page. You may also want to consider that the EPLI included in your D&O policy
is more limited and exclusive than a standalone policy.
D&O Insurance Does NOT Cover Criminal Acts.
Directors & Officers Insurance can protect your board members from devastating lawsuits
where they inadvertently made managerial mistakes. However, the policy will not
cover them if they are guilty of:
- Intentional criminal activity
- Illegal profits
D&O coverage only covers "wrongful acts" as defined by the policy.
D&O Insurance is Purchased by Your Company, Not Individuals.
Though it may seem that your directors, officers, and board members receive all
the perks of your D&O policy, your company is still responsible for purchasing the
coverage on their behalf. Though it can also protect you as the business owner,
the policy benefits your business indirectly by allowing you to attract the talent
that will take your company to the next level.
How Much Does D&O Insurance Cost? Get a D&O Quote Now!
D&O coverage is a good fit for your business when you want to grow your company
and gain the trust of your investors. When you work with TechInsurance, you not
only receive top-rated coverage from the nation's most respected providers, you also
benefit from our inside knowledge of the tech industry.
We know the risks your business is most likely to encounter and can help create
a plan that addresses those exposures. Check out the difference for yourself, starting
quick online application. Within minutes of finishing your application,
we send you free, competitive quotes for comparison.