Should we purchase directors and officers liability for our privately held company?

That’s an excellent question, and it’s a question asked by many directors and officers of privately held companies like yours.

It’s important for you to understand the many risks you face as directors and officers of a privately held company, and how these risks can be handled by liability insurance. You already recognize the importance of purchasing general liability, automobile liability and employers’ liability insurance policies, but these policies are generally limited to claims based on bodily injury and property damage for which your company is legally liable.

Directors and officers (D&O) liability insurance policies are designed to cover other types of claims that might be brought against you individually or the company for the decisions you make on behalf of the company. Such claims can be made when actions, inactions or decisions of the company’s directors or officers cause financial harm to others, including stockholders, employees, competitors, customers, suppliers, or creditors. In addition, a variety of claims can be made by government agencies against the directors and officers of privately held corporations, including those involving environmental contamination and employee health and safety.

Without proper insurance to cover claims such as these, your personal assets may be the only available source to cover the potential costs of defending the allegations and funding any adverse settlements or judgments.

D&O liability insurance is widely available from a number of insurance companies and is surprisingly affordable. Ask your agent for a proposal and premium quote.

This article was prepared and made available to your agent by the Independent Insurance Agents of Texas, which is solely responsible for its content. Please read your insurance policy. If there is any conflict between the information in this article and the actual terms and conditions of your policy, the terms and conditions of your policy will apply. The Independent Insurance Agents of Texas is a non-profit association of more than 1,800 insurance agencies in Texas, dedicated to helping its members succeed, in part by providing technical resources that explain insurance policies sold to their customers.