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Private Company Directors and Officers (D&O)

Private companies often don’t have the deep pockets that make public companies a target for litigation. They also don’t have the same type of regulated responsibilities to their shareholders that public corporations do. That often leads to private companies underestimating the risk exposure of the company and the board of directors.

Burns & Wilcox can provide access to Private Company Coverage that includes D&O and Employment Practices coverage that will limit your clients’ exposure to the financial risk of running a business. Coupled with our extremely fast submission response time and low minimum premiums, Burns & Wilcox is one of the leading providers for wholesale insurance.

Coverage Details and Features

  • Broad entity coverage
  • Claims made policy
  • Flexible shared and separate limit options available for all coverage parts
  • Spousal/domestic partner extension coverage
  • Optional discovery period up to six years
  • Worldwide coverage
  • Final adjudication wording for conduct exclusions
  • Full severability for all insureds, including the company
  • Provides coverage for investigative costs arising out of a shareholder derivative demand
  • Applies coverage for wrongful acts anywhere in the world
  • Separate and shared limits flexibility
  • Automatically covers acquired subsidiaries
  • Allows claims to be reported up to 90 days post policy expiration
  • Offers additional limits for individuals when costs of a claim cannot be indemnified by the company

Questions to Ask

May I see your financial statements?
Insurance underwriters want to be comfortable with a risk before they will write its Directors and Officers (D&O) coverage, so they traditionally turn to the financial statement to quickly learn about a business’ health and operations. Financial statement include a balance sheet, a cash-flow statement, and a profit-and-loss statement.
Was your financial statement reviewed by an outside auditor?
The balance sheet provides a picture of the assets and liabilities of a business, so a report showing a company with few assets and a lot of liabilities would be a red flag for an underwriter. So would indications of a cash-flow problem, or that the decisions by the company’s directors and officers are affecting the value of the company. Since the underwriter gleans so much the information from the financial statement, he or she is much more comfortable knowing an outside auditor has attested to its accuracy.
For a startup company: May I have your business plan and a current statement of your assets and liabilities?
Every company – even a new one – has assets and liabilities and should be able to provide current information on these. The investments in cash and equipment are all assets, while a bank loan is a liability. A startup company should be keeping track of such matters and be able to provide current information on these. Absent an audited financial statement, the startup should provide its business plan, where it shows projected assets, projected revenues and projected expenses based on the research they did. A good plan helps tell the business’ story and demonstrate that this particular management team can take the business to a higher level.
What kind of experience do your officers and board members have in running a private company?
Experience in running a successful business and making difficult business decisions can help predict management’s ability to handle changes in the business climate, while retaining the value that investors and shareholders want to see. It helps to have a list of officers.

Ask an Expert

What’s the difference between private and public D&O?
Private and public D&O policies are very similar; the difference is simply whether the policy holder is a public or private company or organization. Directors and officers of both experience similar risks. They are often industry experts or high-ranking executives, held to high standards by shareholders and held accountable for their decisions. We tend to see public companies fielding more claims than private companies because they have more stakeholders.
How can agents assess the risks private and public companies face?
Although there are many factors, agents should be aware of two key pieces of information used to assess risk: Financial statements: Financial statements are the ultimate gauge of an organization’s financial health. They reveal how well the board manages its finances as well as the amount of assets—the larger the assets the larger the risk exposure. Study the industry: Agents should study the industry in which the company operates to recognize risks associated with it.
What are common claims private/public companies need to be wary of?
A common D&O claim we see is infringement of antitrust legislation, which prevents or controls trusts or other monopolies in order to promote competition. Claims can be filed on patent infringement, false advertising, or even slander of another company. Derivative suits are also very common. Essentially a shareholder can file a suite if he/she believes the company’s directors and management are failing to exercise their authority for the benefit of the company and all its shareholders. A derivative suit could be filed when a shareholder believes an incident of fraud, mismanagement, self-dealing and/or dishonesty that is being ignored by officers has occurred. The most common claims typically involve breach of contract or mismanagement of funds.

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