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 Insurance.

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
  • Fraud
  • 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 with our quick online application. Within minutes of finishing your application, we send you free, competitive quotes for comparison.