Running a business involves its share of risks. The risk needs to be evaluated, and risk control techniques need to be implemented to reduce the frequency and severity of potential management liability claims.
Transferring this risk to an insurance company also needs to be considered. A number of different coverages are available to protect your company from management liability or what is also called “Executive Risk.” The insurance marketplace for these coverages is relatively broad.
Although you may elect not to purchase some of these coverages – or any of them for that matter – it is better to be aware of what is available and make a conscious decision to retain the risk than to find out after a loss that you could have purchased insurance to cover it. There are many other exposures that face the executives of private companies that a D&O policy cannot respond to. Some of these coverages are:
Directors & Officers Liability (D & O)
Directors & Officers Liability insurance, also known as D&O insurance, is a critical component to the stability of a company should a lawsuit arise alleging mismanagement of the firm. There are many people in the company who can become included in this lawsuit, and only a D&O policy can provide protection.
There are many policies that comprise Executive Liability Insurance, including Fiduciary Liability, Employment Practices Liability, and Professional Liability. Each of these policies provides protection for the company and each has their own specific components that make them unique.
Employment Practices Liability (EPL)
The EPL policy covers defense expenses, settlements and damage awards resulting from employee lawsuits alleging discrimination, harassment, wrongful termination, and other employment related claims.
The number of employment related lawsuits is at an all-time countrywide high, and is steadily increasing. Hundreds of thousands of employment claims are filed with state and local agencies.
Why is employment practices liability insurance important?
Studies show that up to 60% of the nation’s employers are sued by an employee. If someone perceives discrimination or harassment, from you or other employees, you can be held liable. New companies are especially at risk for liability claims, because they often have not taken the time to create employee handbooks with clearly documented policies and procedures. Why take the risk? EPL coverage protects you from damages from such claims.
Of all U.S. civil litigation, employment issues make up 30 percent of the cases. And, it has been reported that charges filed through the Equal Employment Opportunity Commission increase every year.
How does EPL insurance work?
Basic EPL covers your business for employment practices claims such as discrimination, harassment, failure to promote, wrongful dismissal, etc. In recent years, the frequency of employment practices claims has spiked
Fiduciary liability insurance responds to claims made against fiduciaries and trustees alleging breaches of duty imposed under the Employment Retirement Income Security Act (ERISA), including improper investments, plan and employee advice, insufficient funding, and failure for an insurer to perform in the administration and management of employee benefit plan.
The individuals who administer Employee Benefit Plans are subject to personal liability under ERISA. Fiduciaries are obligated to act solely in the interest of plan participants and beneficiaries, and are personally liable for any breach of their duties. Even with a participant directed 401(k) plan, fiduciaries can be held liable for a variety of reasons, such as poor investment options and failing to educate employees on their options.
Who needs Fiduciary Liability?
Fiduciary liability insurance is a popular vehicle for the financial protection of fiduciaries of employee benefit plans against legal liability arising out of their role as fiduciaries, including the cost of defending those claims that seek to establish such liability. Most popular is a stand-alone form or separate fiduciary liability policy.
Crime insurance – also known as "fidelity" insurance – is often overlooked, leaving companies vulnerable to potential catastrophic losses. Commercial crime insurance protects your company from Fraud, Theft and Forgery.
Crime-related losses are not typically covered by commercial property insurance, so it’s important to make sure your business is protected.
Purchasing crime insurance is smart no matter what line of business you're in. Gatta Insurance can provide you with a quote for basic commercial crime insurance products that are easily customized with options, also known as endorsements. These optional coverages can be tailored to fit the unique needs of your business.