Why Private Companies need Director’s & Officer’s Liability Insurance
Whether they are concerned about exposures to shareholder or debt holder claims, directors and officers of private companies and nonprofit organizations should be aware that an array of other types of claimants could threaten their assets, said John LaBarbera, a Chicago-based member of the global insurance group at Cozen O’Connor P.C. Some sources of the most immediate risks include:
FOR PRIVATELY HELD COMPANIES
- Employees
Discrimination, wrongful termination, retaliation, invasion of privacy, harassment - Clients and Customers
Failure to deliver services, poor product performance, misleading or misrepresentative statements, breach of contract - Competitors
Unfair trade practices, interfering with a contractual relationship, violation of anti-trust laws, intellectual property, infringement - Fellow directors, minority shareholders, and debt holders
Breach of fiduciary duty, mismanagement of acting against the best interests of the company
FOR NONPROFIT ORGANIZATIONS
- Volunteers
Risk profile similar to employees, including discrimination, wrongful termination, retaliation, invasion of privacy, harassment - Government Regulators
Misappropriation of funds or failure to return unused money back to the government, violation of applicable laws - Third-party entities (suppliers, providers, other nonprofits)
Interfering with a contractual relationship, intellectual property infringement, breach of contract - Donors and beneficiaries
Misuse of donated funds, misrepresentation of the entity and/or its stated purpose
Note: Highlights taken from an article in Business Insurance June 2011.