News

09 Dec 2016

Ever-increasing D&O Exposures for Private Companies

Today’s society is incredibly litigious. That McDonald’s has been sued for serving coffee that’s too hot and Starbuck’s has been sued for serving drinks containing too much ice is telling. The news is full of examples of frivolous lawsuits. Other lawsuits aren’t frivolous at all. Some result from whistleblowers at private companies sharing damaging information about a wrong or a perceived wrong. Your directors and officers are not immune from punishment, and that’s why you absolutely need D&O Liability coverage.

As noted in an article in the insurance industry’s IA Magazine, management (a company’s directors and officers) are ultimately responsible for following the law and ensuring a company’s operations are effective, secure, and safe. Here are two examples of common risk exposures private company directors and officers face.

Regulatory Exposures

Private companies face increasing scrutiny from a myriad federal and state agencies and their company directors and officers are at risk of being named in enforcement actions. Some of the most common regulatory exposure risks directors and officers currently face include allegations of:

  • S. Department of Labor Fair Labor Standards Act violations (failure to pay required overtime),
  • National Labor Relations Board National Labor Relation Act violations (setting restrictive social media policies that prevent union and non-union employees from engaging in “protected, concerted activities,”
  • Federal Trade Commission violations involving false product claims, and
  • Department of Justice Foreign Corrupt Practices Act violations involving directors and officers accused of corruption/bribery in foreign markets.

A comprehensive D&O policy can protect private company directors and officers from these and other regulatory risks.

Cyber Exposures

In the past couple of years, there has been increasing news coverage about high-profile cyber-security breaches at retailers including Target, Home Depot, and the Wyndham hotel chain to name a few. Cyber-security breaches are becoming more common in companies large and small, and plaintiffs suffering financial damage from these breaches hold a company’s directors and officers to blame.

 

About Euclid Exec

Euclid Executive Liability Managers is a managing general agency offering directors and officers liability for public, private, and non-profit companies; employment practices liability; and fiduciary liability insurance. To learn how we can help you manage your business risks, contact us at 630.238.1900.