Why is this important and what does it cover?

There are several coverage gaps in standard insurance programs that eliminate insurance protections for ownership, officers, directors, managers and their respective corporate entities for liability exposures that may arise from the management, finance, governance and employee benefits. Management Liability coverage typically offers: Directors & Officers Liability, Employment Practices Liability and Fiduciary Liability. Clients can purchase their coverage a la-carte.

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Directors & Officers Liability (D&O)

Chubb cited in their 2013 Private Company Risk Survey, the average total cost to the company of a D&O event, including judgments, settlements, fines and legal fees were $697,902. Whether you’re public, private or nonprofit, this insurance helps cover defense costs and damages (monetary and non-monetary) arising out of wrongful act allegations/lawsuits. In certain circumstances, these types of claims can find the individual directors and officers personally liable for their actions and/or lack of action. Exposures that could trigger the need for a D&O policy are: securities performance, non-compete or employee agreement violations, intellectual property/trade secrets violations and breaches of fiduciary duties.

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Employment Practices Liability (EPL)

According to the 2017 Hiscox Guide to Employee Lawsuits, the average total cost of claims that resulted in a settlement payment was $160,000, and the average duration of an employment claim was 318 days. This coverage provides indemnity and defense against claims by workers or third-parties that allege their rights are violated. A few lawsuits that could trigger the need for EPL, include: discrimination, sexual harassment, wage & hour disputes, breach of contract, wrongful termination, failure to hire, wrongful discipline and wrongful infliction of emotional distress.

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Fiduciary Liability

If your organization offers benefit plans its important to realize the individuals responsible for administering those plans are often held personally liable for the plan’s performance. This coverage spans across two broad areas of liability: fiduciary liability and employee benefits liability. These employee benefit programs are monitored (passive) and governed by the Employee Retirement Income Security Act (ERISA). A few exposures that could trigger the need for a Fiduciary Liability policy are: company stock, 401(k) plan fees, healthcare plan administration, investment risk/performance, failure to enroll and offering benefit advice.

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Claims Example:

A privately owned company offered supplemental life insurance policies to their employees as an optional benefit. One employee had recently signed up for $50,000 of life insurance but the plan administrator accidentally forgot to submit the application. When the employee unexpectedly passed away, his spouse requested information on the life insurance policy. When she was told the policy was not in force a lawsuit was filed and the company, along with the plan administrator, was sued for damages. Luckily, the company did have the appropriate Fiduciary Liability policy in place that indemnified and defended liabilities arising from their administrative error which ended up costing the company $70,000, including the award and legal fees.