A Directors and Officers Liability policy provides financial protection for the board members of a business , both For Profit and Not- for Profit business, in the event they are sued in conjunction with the performance of their duties. Claims can be filed against the entity, the board of directors or any individual board member alleging a wrongful act. Board members can be held personally liable for claims arising out of their actions or inactions as directors and officers. Claims can be brought against directors and officers by a wide range of individuals including shareholders, competitors, customers, employees and\/or government entities.<\/p>\n
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According to a Chubb Private Company Risk Survey, the average total cost to the company of a D&O event, including judgments, settlements, fines and legal fees is $697,902.<\/h3>\n<\/blockquote>\n
Claim Scenarios<\/strong><\/p>\n
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- $370,000+ Breach of Fiduciary Duty —<\/strong>\u00a0A minority shareholder invested in an agricultural supply company after reading the board\u2019s business plan, which included a detailed list of steps management intended to take in order to achieve superior financial results. Due to continued in-fighting on the board, a number of steps were never followed, resulting in lower than anticipated profits. The minority shareholder sued for breach of fiduciary duty and misrepresentation. The insurance company paid defense expenses in excess of $150,000 before the case ultimately settled for $220,000.<\/em><\/li>\n
- $788,000+ Misrepresentation —\u00a0<\/strong>Following a merger between a health care district and hospital, the health care district filed suit and sought court intervention to stop the closure of the hospital\u2019s OB\/GYN department. The health care district alleged that during the merger negotiations the hospital falsely represented that the hospital would remain a full service medical provider with an OB\/GYN department. Shortly after the merger, the new hospital scheduled the closure of the OB\/GYN department. The plaintiff also alleged fraudulent inducement and breach of the merger agreement. The matter was resolved with the health care district agreeing to withdraw its claims. Total expenses, including the cost of defense, were more than $788,000.<\/em><\/li>\n
- $240,000+ Defamation\/Slander —\u00a0<\/strong>A physician\u2019s surgical privileges were suspended by the insured hospital. After appealing the suspension, the physician\u2019s privileges were reinstated. Following reinstatement, the physician resigned his privileges and filed suit, alleging the insured hospital had improperly suspended his surgical privileges in violation of the hospital\u2019s Peer Review Policy and Credentials Manual and in violation of the state\u2019s Peer Review Act and the Health Care Quality and Improvement Act. The causes of action in the lawsuit included violation of due process rights, defamation\/slander per se, defamation\/slander and tortuous interference with contract or prospective business advantage. The matter settled for $240,000, with defense expenses totaling approximately $65,000.<\/em><\/li>\n<\/ul>\n
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