Small Business Directors & Officers Liability
Small Business Directors & Officers Liability
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If you lead a small business, you are likely aware that property damage and bodily injury are the mainstays of commercial general liability – otherwise known as CGL insurance. However, you may not be aware that unlike CGL, directors and officers insurance is designed to specifically address what’s known as a “wrongful act” an actual or alleged error, omission, misleading statement, neglect or breach of duty. This is an important distinction if you are renewing or reviewing your small business insurance package.
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A Single Board Vote Can Put Your Small Business At Risk
Because personal credibility, regulatory and directional changes make headlines and generate social media buzz, each and every decision your directors and officers make may be judged by a very public microscope. The success of any small business is tied to transparency and accountability. Should a worst-case situation arise, your small business could find itself facing the uncharted waters of a lengthy litigation as a direct result of decisions made by your board.
The legal cost to defend individual directors and officers is substantial, as are the potential penalties that can impact their personal assets. Your small business directors and officers insurance policy may include:
- Coverage for past, present and future directors and officers of the small business
- Defense costs and indemnity coverage to the entity listed on the policy declarations
- Reimbursement to the small business for a contractual obligation to indemnify directors and officers who serve on the board
Providing the best risk protection is an important recruitment and retention tool. Because your directors’ and officers’ personal liability risks are not covered under ANY personal insurance policy — small business directors and officers insurance is an important cornerstone of your risk management strategy.
How does small business directors and officers liability insurance differ from professional liability insurance?
Small business directors and officers liability insurance is actually a type of professional liability insurance. However, it is less broad than professional liability coverage in that it specifically aims to protect the liability of directors and officers of small businesses.
Who needs small business directors and officers liability insurance?
Many businesses – whether large or small – could benefit from directors and officers liability insurance. This is because businesses of all sizes are vulnerable to expensive claims, even if they are small and only have a handful of shareholders. In some cases, directors and officers liability insurance might be especially important for owners of small businesses, as the financial impacts of a lawsuit could have more severe consequences.
Ultimately, if your small business has any type of board, whether it be a corporate board, board of directors, or advisory committee, adding small business directors and officers liability insurance to your policy might be a wise choice.
What factors might influence the cost of small business directors and officers liability insurance?
A few factors that might impact small business directors and officers liability insurance rates are as follows:
- The industry, size, and location of your small business
- Your years of experience and training
- Your insurance claim history
- The number of employees at your small business
- Your small business’s annual and projected revenue
- Your business’s quality control procedures
- The coverage options, policy limits, and policy deductibles you choose
How can I purchase small business directors and officers liability insurance?
You can purchase small business directors and officers liability insurance directly from an insurance company or through an insurance brokerage like ALIGNED. The advantages of buying commercial insurance through a broker range from having an unbiased insurance expert at your fingertips to having someone to shop around and compare coverage options on your behalf. Overall, purchasing small business directors and officers liability insurance with ALIGNED is the height of convenience. It could also save you money since our experts might be able to unlock discounts you didn’t even know you were eligible for. Contact ALIGNED to get started today.
