Want to Sleep Better at Night? Consider Buying D&O Insurance

All publicly traded companies, regardless of size, are exposed to risks arising out of the company’s securities. Companies are subject to SEC oversight, securities regulations, and reporting requirements, all of which expose organizations to risk. Further, the actions of providing guidance to the street, conducting road shows, and having non-director shareholders create additional risk and potential liability for a firm. Any one of these items can be the impetus for a securities-based lawsuit. Additionally, directors and officers are held personally liable for their actions in running a company. This means that personal assets and wealth are potentially exposed in the event of a lawsuit against the firm that also names the individual director or officer. Directors & Officers (D&O) liability insurance is designed to protect individuals and companies from such exposures.

D&O Insurance Costs

Directors and Officers make decisions daily while wearing their “fiduciary hats.” However, I often advise clients to take off this “hat” and think beyond the direct cost of the D&O insurance premium, looking to the indirect costs of not purchasing the coverage. Such costs include the inability to attract top board talent, exposing personal assets to loss resulting from the error of a colleague, and even the potential demise of the entity. Given these potential scenarios what would you be willing to pay for such protection?

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Regan Guth is a Vice President with Diversified Insurance Group in Salt Lake City, UT. Over the past 7 years Regan has advised dozens of public companies in the procurement of D&O insurance coverage. Regan can be reached at rguth@diversifiedinsurance.com, (801) 325-5080.