Common Concerns and San Francisco Directors and Officers Insurance

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:


  • Shareholders/investors


  • Competitors


  • Customers


  • Employees, or


  • Government agencies


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.


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