The decisions made by officers and directors of large, multi-national corporations or privately held companies or even non-profit organizations have a profound effect on their employees and may also have an impact on others in a variety of ways. But the scope of a business’ coverage from its General Liability insurance policy is limited to Bodily Injury, Property Damage or Personal and Advertising Injury.
What about the potential risks for officers and directors from shareholder litigation? Or the consequences arising from alleged employee discrimination, or harassment or mismanagement of the company’s benefits program? What about a homeowners association that is charged with enforcement of rules, or the church board that decides how to spend its member’s contributions?
Officers and directors for each of these organizations are charged with making wise and prudent decisions. Their organizations can protect them by investing in what is broadly referred to as Management Liability Insurance to cover their teams and their businesses against a variety of claims.
Directors and Officers (D&O) Coverage provides protection in the event legal action is brought against officers or directors. Common types of claims include:
• Breach of fiduciary duties
• Wrongful termination
• Deceptive business practices.
Without proper protection, board members’ business assets can become vulnerable to claims and litigation. D&O insurance allows board members to make business decisions without fear of any personal liability. However, D&O insurance does not cover intentional illegal acts.
Employment Practices Liability covers claims regarding employees including:
• Wrongful discipline or termination
• Sexual harassment
• Breach of employment contract
Fiduciary Liability Insurance protects a business against claims of mismanagement of a company’s benefit plan, including retirement plans, 401Ks, medical benefits, dental, life and disability.Fiduciary Liability Insurance also covers losses due to an individual’s negligent administration of benefit plans and protects those employees and their company in the event a claim is made against the company. Also, if the company provides benefits to employees through health and retirement plans, anyone involved with the management of that plan has a fiduciary responsibility.
It is wise for Nonprofit Organizations to have Nonprofit Management Liability Coverage for their directors and board members. Nonprofit board members may be less familiar with running an organization than officers in for-profit businesses, potentially opening them to certain liabilities.
Allegations against nonprofit organizations can come from nonprofit clients, employees and third parties, including government agencies or funding organizations. These allegations can be costly and can impact the nonprofit by loss of funding and a damaged reputation. Common claims against nonprofit leadership include:
• Mismanagement of funds
• Conflicts of interest
• Breach of fiduciary duty
Not all Management Liability policies are alike, so please reach out to the professionals at McMichael Insurance for assistance. We would be glad to help.