More Businesses Are Without Executive Liability Insurance

A recent survey conducted by risk management publication Business Insurance revealed that an increasing number of businesses are foregoing directors and officers (D&O) insurance coverage for their executives. In a recent article featured on, one of every four private and non-profit firms did not have such insurance, primarily because they believed that their executives did not need such coverage.

It is important to remember that directors and officers can be held accountable for a number of issues, including breaches of their fiduciary responsibilities, mismanaging collected funds, acting beyond their chartered authority or violation of state or federal laws. Although not as common, executives also could face harassment accusations and discrimination suits. Executives can also be named in products liability lawsuits, claims of unfair trade practices, as well as breach of contract suits.

With these inherent risks, it is important to consider how an executive liability policy can minimize the potential for a legal dispute to cripple the business. While most business owners fear a judgment that can be levied, legal costs can be equally as damaging. As such, an executive liability policy can be helpful in protecting the company from unforeseen risks.

Directors and officers coverage be especially important for businesses operated under family ownership, and other closely held enterprises. In these situations, disagreements over management can get intense, personal and harm the company. It is not uncommon for personal squabbles (that have nothing to do with the business) to spill over into everyday affairs and affect critical management decisions that may harm the company.

Business owners should also understand the variety of coverage available with their insurance policies. Most risk management programs can include employment practices liability coverage, in addition to fiduciary and fidelity protection. Consulting with an insurance agent and an experienced attorney can be helpful in designing a plan to protect your business.