As a general contractor, you have a lot you are responsible for. Your work site is often a dangerous place to be and you typically have the duty of making sure your employees are protected from those dangers. As you consider the options you have, don’t overlook construction general liability in Newton, NJ. The following are three reasons you need this coverage:
Security – Instead of worrying about claims being brought against you simply for handling a dangerous job, you can do what you are best at and know you are secure if someone comes after you financially. This also gives your employees a sense of security.
Protection – You need your assets to do your job, and if they are seized so you can afford a judgment, you could be put out of business. General liability protects your assets, and essentially your company.
Survival – Nobody plans to have a judgment brought against them, but especially in a risky industry, you can’t be too careful. You need a survival plan to ensure your business stays intact no matter what happens.
As many former officers and directors are well aware, a failure to procure adequate directors and officers (D&O) insurance coverage can result in a significant loss, especially when personal assets are exposed. However, this product is quite complex, containing a laundry list of variables, any one of which can result in either a) denial of coverage or b) a reduction in the amount of money a carrier will pay for defense or settlement of a claim.
Another important aspect to consider is that Corporate indemnity, which directors and officers rely upon to pay defense lawyers in the event they are investigated by a federal agency or sued personally, disappears with insolvency or bankruptcy of the corporation, leaving directors and officers with personal D&O insurance coverage as their only line of defense against any judgment ruled against them in court.
The negative impact of failing to carry adequate coverage
Unfortunately in these situations, personal estate often hinge on insurance policy language, or on a single sentence or phrase buried within a contract or, endorsement, which could result in not having adequate coverage. This can certainly have a direct impact on the personal assets of a director or officer, and any lapse of coverage could have devastating consequences. In the following general summary of directors and officer’s insurance products, a few of the most important issues are addressed.
Grasping a better understanding of the D&O policy
The basic D&O insurance product offered by many domestic and foreign insurance carriers has at least two separate parts, an executive liability part, (often referred to as “Side A”), and a corporate reimbursement part (often referred to as “Side B”).
The “Side A” portion of this coverage pays directors and officers directly for loss (including defense costs) when corporate indemnification is unavailable. The Side B portion of coverage provides compensation to the corporation for any money paid as indemnification to those insured directors and officers involved in litigation.
While such coverage presents some unavoidable risks, even when properly negotiated, it is essential to have it in place. First of all, coverage for the corporation can exhaust available limits, leaving directors and officers out in the cold. Secondly, a bankruptcy court could determine that policy proceeds are assets of the estate, and prohibit payment to the directors and officers under the policies. This illustrates the importance of speaking with an agent with clear knowledge of D&O coverage with any questions or concerns regarding this product.
Many small, privately held companies mistakenly think that they do not need the kind of insurance protection that larger, publicly traded companies have for their directors and officers. But San Francisco Directors and Officers (D&O) insurance has a place in the insurance portfolio for practically any and all companies operating in the area.
D&O insurance is designed to cover claims based on the actions of a company’s directors and officers working within their corporate capacity. Claims can be filed by an array of people, including:
The cost of defending such claims can run exponentially high, and if a claim proceeds to judgment or settlement, the outcome can be financially damaging to a company.
There are a few prime reasons for adding D&O liability coverage to any insurance protections already in place for any business. For example, while private businesses may not trade company shares on a public exchange, they do have investors who expect to turn a profit on the money they have invested. Today’s credit market can make it very difficult to succeed at doing this, meaning that new business enterprises will often have a harder time getting off the ground. And face it, if investors lose money they’re likely to seek recourse against the firm’s top executives.
Many private companies are established with the hope that eventually the business can go public. However, if and when that deal does occur, D&O coverage can protect the founding entrepreneurs against claims by shareholders and/or investors that the sales price wasn’t up to par.
In many privately-held companies, directors and officers often are active, hands-on business executives, and because they are quite involved in the business operations of their company’s, some of their actions are likely to be called into question.
Employment practices liability litigation is a huge concern
Claims of sexual harassment, discrimination, and wrongful termination are growing in numbers. These types of lawsuits can result in crippling judgments and settlements. The type of hands-on management associated with many private firms’ key executives makes them easy targets for these types of claims. In addition to D&O, some type of employment practices liability insurance policy makes sense for these firms.
D&O Insurance provides protection for directors and officers for private companies in the performance of their duties. Many consider D&O insurance as an errors and omissions (E&O) insurance for directors and officers. This insurance generally includes the following coverage:
Employment practices liability – exposure having to do with employee relations.
Fiduciary liability – exposure relating to monetary issues, such as savings, pension, profit-sharing, health plans, and employee benefits.
The largest exposure faced by directors and officers for private companies has to do with that part of employment practices liability dealing with discrimination and harassment suits. These have the highest likelihood of occurrence and the highest overall judgments against a company. In addition, clients should supplement their D&O insurance with an actual E&O policy, as the former covers management while the latter covers actual performance negligence with respect to products and services.
When to Get the Insurance
Mangers procure D&O insurance at the time they assemble a board of directors. In fact, this type of protection is often a requirement by most boards. Those seeking venture capital will also find D&O as part of the requirements for funding. Conservative managers will seek D&O insurance at the time they hire their first employee.
D&O protection allows directors and officers for private companies to protect the personal assets of both the manager and the board members. It allows managers to operate under the confidence of their protection.