There are thousands of private company claims made every year which correlate to millions of dollars in settlements and courts awards around the world. Yet, often private company directors and officers feel that due to their non-public filing status the likelihood of a claim is negligible. But, the fact is that the directors and officers of private companies are vulnerable to these claims. As they are often involved in day-to-day operations and the decision makers in most circumstances, private company directors and officers are more likely to be named in lawsuits initiated by employees and others. Moreover, in closely-held private companies, the owner’s personal net worth may be tied to the financial health of the company making costly D&O liability claims even more devastating.As mentioned above, relatively few private company management liability claims make headlines, but these claims are filed virtually every day by employees charging private company directors and officers with wrongful termination,
As mentioned above, relatively few private company management liability claims make headlines, but these claims are filed virtually every day by employees charging private company directors and officers with wrongful termination, discrimination, and harassment. Courts have held both management and the company responsible for wrongful acts of subordinates, and for negligent supervision, improper screening of employees, and failing to investigate or respond to employment-related violations. Right or wrong, employment claims are costly, some 85 percent of all employment practices cases are settled, usually for undisclosed amounts. And the number of employment practices claims filed against directors and officers has doubled in recent years.
Beyond employment practices claims, private companies may be sued by shareholders and customers, as well as competitors, government bodies, creditors and others. The following points demonstrate why the purchase of directors and officers insurance is critical. In India, a simple cheque bouncing case under section 138 can involve all directors including the Independent Directors and officers.
- D&O insurance from a quality insurer can take private companies through their IPO and into public ownership well protected. Developing a proven track record with a quality insurer provides an insured with an easier transition into the public D&O insurance market. Private companies with an established relationship with a D&O carrier often receive reduced pricing and expansive terms.
- Complex claims brought by competitors, such as anti-trust and unfair competition claims against directors and officers, can generate sky-high defense and settlement costs.
- Investigations by government and regulatory agencies can generate enormous defense costs – – even if no wrongdoing is found. And when wrongdoing is found, settlement values are often severe.
- Company assets can be closely tied to the personal wealth of directors and officers, making protection for claims brought solely against the company vital.
- When the company cannot indemnify its directors and officers in D&O claims, D&O insurance can step in instead.
- Shareholders of private companies frequently sue for inadequate or inaccurate disclosure in financial reports and statements made in private placement materials.
- D&O insurance can protect the personal assets of a director’s or officer’s spouse, as well as the assets of a deceased director’s or officer’s estate.
- With D&O insurance in place, management can focus on managing the company rather than managing protracted litigation
This cover is suitable for those Directors & key officers who are in a decision-making position. These directors and officers in pursuance of their duties may take some actions which may be in violation of certain statutes or Indian Laws.
The Directors and Officers liability insurance policy provide indemnity to directors and officers for legal costs, damages and expenses incurred, arising from claims brought against them personally due to any wrongful acts in their managerial capacity.
- Vulnerability to shareholders/stakeholders claims
- Sexual harassment, discrimination allegations, and other employment practice violations.
- Regulatory investigations.
- Accounting irregularities.
- Exposures relating to M&A
- Corporate Governance requirements
- Compliance with various legal statutes.