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What is directors and officers insurance?
Those who lead organizations have significant responsibilities, and with those responsibilities come some liabilities. Should leaders take action that adversely impacts their organization, they might be held financially liable for any fallout. Directors and officers insurance may help leaders of Texas organizations shield themselves from this sort of liability risk.
Directors and officers insurance is specialized commercial insurance for organizational leaders. If a leader is sued for their decision or action, the coverage might pay legal fees and a settlement.
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Who in Texas needs D&O insurance coverage?
Most people who hold leadership positions within Texas organizations can benefit from D&O insurance. Business leaders and nonprofit leaders alike should consider the coverage. The following are a few examples of professionals who often get D&O coverage:
- CEOs, CFOs, COOs, CMOs and other C-level executives
- Presidents, vice presidents and directors
- Chairpersons, board members and officers
Anyone who’s unsure whether the coverage makes sense for them can ask an insurance agent who specializes in D&O. A specialized agent will be able to help assess whether a person’s risk exposure calls for purchasing the coverage.
Do volunteer leaders of nonprofit organizations need D&O insurance coverage?
Even though volunteer leaders are unpaid, their decisions and actions can have dramatic impacts on the organizations they lead. Should a decision have a dramatically negative impact, volunteer leaders can still be held responsible regardless of whether they’re paid.
Many volunteer leaders should thus consider the benefits of D&O insurance. Again, an insurance agent who knows the coverage well can help assess whether it’s needed.
Typical Claims Covered
What sorts of claims are covered by D&O insurance?
The exact incidents that a D&O policy covers are determined by the particular policy’s terms, conditions and exclusions. In many cases, these policies extend coverage to incidents such as:
- Conflicts of interest (real or apparent)
- Inappropriate personnel decisions
- Poor investment decisions
- Unallowed sharing of confidential information
- Acts of gross negligence
- Acts prohibited by law
- Other actions as determined by the policy
Notably, poor business decisions that fail to address market and other business changes generally aren’t covered. Insurance isn’t a substitute for wise decision making.
Illegal actions that are knowingly committed also often are excluded. Should a leader unwittingly violate a policy or certain laws, however, the financial fallout might be covered by a policy.
Are regulatory charges covered by D&O policies?
Regulatory charges brought by government, quasi-government and industry agencies have historically been excluded from D&O policies’ protections. Some insurance companies have slowly begun including coverage for these charges, however.
Leaders who have specific concerns about regulatory charges should consult an experienced agent who’s familiar with the details of these policies. An informed agent can check whether any available policies include coverage for this specific risk.
Who usually pays for D&O policies?
Although the protections afforded by D&O policies primarily apply to leaders, the premiums are often paid by organizations. Organizations usually pay the premiums because leaders wouldn’t be exposed to these risks if they didn’t serve their respective organizations. If leaders weren’t leading their organizations, they’d had no need for the coverage.
How much do D&O policies cost?
D&O policies’ premiums vary, with a leader’s particular risk exposure directly impacting premiums. An independent insurance agent can help leaders and organizations find out how much premiums would be for their situation. Independent agents can explore policy options across insurance companies, to find the best available coverage and premium combination.
How can leaders in Texas get directors and officers insurance?
For help with directors and officers insurance, contact the independent insurance agents at Ramey King Insurance. Our agents have worked with many Texas organizations and their leaders, and we’re ready to assist you.
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