Further, the employer could potentially be sued by the diagnosed employee for an error in administration of the company’s health plan, as well as the medical costs for the claim itself, which could amount to thousands, if not millions, in favor of the employee.
Administration of your company’s benefits programs should never be taken lightly as mistakes and errors do occur throughout a company’s lifetime. It is strongly recommended you consider this coverage as EBL is typically inexpensive and can be added to your existing policy with your general liability insurance provider.
Directors and Officers Liability
The last and likely one of the more important liability exposures to highlight pertains to directors and officers (D&O) of private corporations. As leaders of a company, directors and officers can be held personally liable to shareholders, employees, customers, partners, investors, creditors and other third parties for the decisions they make.
A common fallacy is that if a company is privately owned, it is not exposed to any type of D&O liability. This is completely untrue as directors and officers in both public and private corporations are required by law to act diligently and with due care, avoid conflicts of interest and activities that benefit them personally at the expense of the corporation, and to comply with the numerous federal and state statutes regulating management and corporate conduct.
As the credit crisis continues to increase the problems that most businesses face today, the most common form of D&O liability stems from the alleged decisions and wrongdoings officers and board members made for the use of corporate funds. Despite the warnings and foresight provided by many financial professionals regarding riskier finance instruments being touted, many corporations have found themselves holding on to much more debt and risk than they have ever had before.
Also, the failure of a business can ultimately lead to lawsuits by former employees against the officers personally since they may have breached their fiduciary duties to attempt to benefit themselves and ignore the affects it may have on the employees.
The disregard for D&O coverage is common throughout private companies. But officers of a corporation make decisions that may lead to a business failure. This failure could potentially affect the constituents you are responsible to, and protecting your own assets or personal investment into the business should be a significant concern.
As economic conditions continue to change, executive liability insurance protection comes to the forefront since these are the areas that most lawsuits are persistently occurring. There is no denying that there will be some bumps along the road ahead, but rational risk management and appropriate and adequate insurance protection will help your company find its way.
Note: This article is not intended to offer legal advice. Any descriptions of coverage provided herein are not intended as an interpretation of coverage. Policy descriptions do not include all the policy terms and conditions contained in an actual policy, and should not be relied on for coverage interpretations. An actual insurance policy must always be consulted for full coverage details.
Mike Gong is a real practice principal and self-storage practice leader for Arthur J. Gallagher & Co., an insurance broker and risk management firm. For more information, call 800.568.0833; e-mail firstname.lastname@example.org.