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Directors and Officers Insurance (D&O)

When researching various types of business insurance, you may have come across directors and officers (D&O) liability insurance and thought to yourself, “That’s for publicly traded companies with shareholders.” It’s true, you may not run the risk of being sued by disgruntled shareholders, but if you have a board of directors helping to run your company, you and your directors are at risk of lawsuits from employees, customers, investors, and many other interested parties. For small businesses, D&O claims may not happen very often, but when they do, the costs to fight the lawsuits can be significant. D&O insurance can help protect against these risks.

D&O Insurance: The who, what & why

Directors and officers (D&O) liability insurance protect the personal assets of corporate directors and officers against claims brought by employees, vendors, competitors, investors, customers, or other parties, for actual or alleged wrongful acts in managing a company. It offers specific coverage not provided by general business liability insurance.

Types of D&O coverage

D&O insurance can be purchased as a separate policy or bundled with other forms of coverage, including Employment Practices Liability insurance to cover employee-related claims, plus crime and fiduciary coverage. The cost of D&O insurance is based on a variety of factors, including the type of business, your company's revenues, whether you have had prior legal claims, and the amount of debt you’re carrying.

D&O insurance policies offer liability insurance coverage for the Directors and Officers of non-profit, for-profit, and privately held businesses.  Directors and Officers insurance helps protect them from defense costs and damages which may arise from managerial decisions that may have adverse financial consequences. All organizations are vulnerable to D&O insurance exposures.

D&O insurance can be purchased as a separate policy or bundled with other forms of coverage. Usually, it’s purchased by the company for the benefit of officers and directors. It may be more cost-effective for smaller companies to purchase a combination policy that includes D&O plus Employment Practices insurance to cover employee-related claims, such as harassment, discrimination, and wrongful termination. Some comprehensive policies may also include crime and fiduciary coverage.

A typical D&O insurance policy designed for privately held businesses may include three types of coverage:

  • A-side coverage: This part covers directors, officers, and sometimes employees, for defense costs, settlement fees, or judgments if the company can not indemnify them, such as if the company has declared bankruptcy.
  • B-side coverage: This covers the company for directors', officers', and employees' losses when the company does indemnify them.
  • C-side coverage: Also called "entity coverage," this financially protects the corporation in its own right. Entity coverage may reduce the limits available to protect the individual officers and directors.

The cost of D&O insurance is based on a variety of factors, including the type of business, your company's revenues, whether you have had prior legal claims and the amount of debt.

Why do veterinarians need D&O coverage?

D&O liability insurance may not seem relevant to you as a practicing veterinarian of a smaller clinic. Even so, if your clinic offers emergency veterinarian services, if you sit on a board for a veterinary association, or if you have affiliation with a non-profit veterinary organization, you can find yourself under the crosshairs.

Associations commonly come under fire for claims of misleading newsletters or websites, malpractice in collecting and spending membership dues, and other issues that affect members or clients. You need insurance to cover these types of problems.

At Vetinsure, we protect you with comprehensive D&O coverage that covers defense costs on behalf of board members and for the association itself. This type of coverage is especially important when considering that an unfavorable court decision can demand compensation from your personal assets if you do not have D&O insurance.

Don’t abandon your membership or participation in the organizations that matter to you because of fears of legal risks. Allow Vetinsure to protect you and your association’s interests with directors and officers liability insurance. Call us today for a quote at 800-272-1249.