Directors and Officers Insurance in Massachusetts
What is directors and officers insurance?
Joining an organization’s leadership comes with responsibilities, and also corresponding risks. Leaders may be held responsible if their decisions or actions negatively impact an organization in a major way. Directors and officers insurance may help leaders in Massachusetts protect against such risk.
Directors and officers insurance is a liability coverage for those who lead businesses and nonprofits in Massachusetts. Policies may protect leaders when they’re acting in a professional capacity.
When do leaders of Massachusetts organizations need D&O insurance?
Most leaders of Massachusetts organizations should at least consider D&O insurance. While a liability suit arising from a decision or action might seem unlikely, facing one could be quite expensive. Leaders are often ill-prepared to individually face such a suit if there’s no coverage in place.
Some examples of the various leaders that might want or need this coverage include:
- Chief officers (CEO, CFO, COO, CMO, etc.)
- Chairpersons, board members, and advisory partners
- Presidents, vice presidents, and directors
- Treasurers and trustees
- Others holding senior leadership positions
What decisions and actions does D&O insurance cover?
As with any insurance, exactly what a D&O policy covers is determined by that policy’s terms. Policies often offer coverage for decisions and actions such as the following::
D&O insurance typically covers decisions or actions that could lead to financial or legal challenges, including:
- Misleading statements or misrepresentations
- Regulatory or legal violations
- Misappropriation of funds
- Decisions resulting in bankruptcy
- Poor corporate governance
These and other actions will likely not be covered, if they’re found to be intentional or associated with criminal activity.
An insurance agent specializing in D&O can review more specifically what a policy would and wouldn’t cover.
Does D&O cover fiduciary breaches?
Breaches of fiduciary responsibilities may be covered by some D&O policies, but coverage varies. Fiduciaries should have a knowledgeable insurance agent check which policies would cover potential breaches. An agent who’s well-versed in D&O will be able to review different policies’ terms.
What are Side A, Side B, and Side C D&O?
D&O policies can include three main coverage aspects. These are frequently referred to as “sides:”
Side A usually protects leaders themselves, often covering situations where organizational funds don’t sufficiently cover the legal fees and/or settlement that a leader faces. This might be needed if an organization’s policy’s limit is too low or met, or if the organization itself becomes insolvent or bankrupt.
Side B usually protects organizations, often covering legal fees and settlements arising from decisions or actions of an organization’s senior leaders. Coverage may extend to one or multiple leaders’ actions.
Side C usually provides securities-related protection. This is primarily needed by certain publicly traded companies, and less often by private for-profit entities.
What costs are covered by D&O insurance?
In the event of a covered lawsuit, D&O policies typically cover attorney fees, court fees, and a settlement or judgment. Other costs directly associated with the lawsuit might be covered too. An experienced insurance agent can review what sorts of fees a particular policy’s terms allow for.
When businesses are merging, do both need their own D&O policy?
Mergers are complex, and those complexities extend to D&O insurance considerations. Leaders should consult with a highly knowledgeable insurance agent, who specifically knows D&O policy terms, to see whether each business needs its own policy during the merger process. It can be especially important to maintain continuous coverage during this time.
How much do D&O premiums cost?
D&O premiums can vary a lot, as they’re based on many factors. Details like the following are just some examples of what might impact cost:
- Whether the organization is a business or nonprofit
- What industry the organization
- How large the organization is
- How many leaders the organization has
- What the organization’s financial position is
- Whether the organization has had previous D&O claims
An independent insurance agent can help leaders and organizations check how much different insurers would charge for coverage.
Where can Massachusetts Organizations find directors and officers insurance?
For help finding directors and officers insurance, contact the independent insurance agents at PIKE Insurance. Our Massachusetts agents will help you find the policy that’s right for your organization or yourself.
