Directors Face Personal Liability in Their Professional Lives

Protection for Directors Amy was excited when she heard the news from the executive search firm she had hired to secure her a position that would allow her to climb the next rung in the ladder of her success: she had been offered a position as a director at an up and coming firm that was creating a lot of buzz in the industry. Sure, the compensation package was only just comparable with the marketplace, but the benefits and perks were out of this world, and the company was only a 15-minute drive away-much better for Amy, who had previously faced a two-hour daily commute. Now, looking to return to the workforce after several months off to have a baby (which turned out to be twins), Amy was looking for a challenging position that would offer her some work/life balance, beginning with a more reasonable drive to the office. She had hit it off right away with the chief executive officer, she knew the chief financial officer from another job years ago where they had worked together. The only thing that gave Amy pause was the fact that the company did not have a directors liability insurance program in place to protect high-level executives. In true leadership fashion, Amy told her prospective employer why they needed this coverage that protects directors from the many risks associated with the executive decisions and management actions they make in the course of every business day:

  • The median settlement for 65 court-approved securities class-action settlements in 2011 was $5.8 million dollars
  • Many top executives make the presence or addition of such a policy a condition of employment in order to ensure their personal assets are safeguarded, so if a firm wants to attract the best executives, it needs to be prepared to offer this coverage
  • These executives can be held personally liable for the decisions they make and the actions they take on behalf of the company they work for
  • Lawsuits can come from many directions, including employees, customers, suppliers, shareholders, creditors, competitors, and even regulatory agencies

Facing such a compelling argument, Amy’s would-be employer lost no time in contacting its professional insurance agent to ensure a directors liability insurance policy was in place before Amy’s first day on the job. Call your agent today to learn more about this important coverage.