The Pandemic & What You Need to Know about D&O Coverage for Business Owners

Question: 
As a business owner, I had to make some tough decisions during the pandemic. Do I need D&O Insurance to protect myself against potential claims brought on by employees, business partners, or investors?

Answer: 
In short: Maybe. But, there may be other forms of coverage that are more appropriate for your situation.

Directors and officers (D&O) liability insurance is designed to protect c-level officers and board members over decisions that are made on a company's behalf. D&O is often procured by large firms - companies that have an executive team governed by a board of directors. However, businesses of any size that have a board or advisory committee should consider D&O coverage, including non-profits. In order to dive deeper into the question, it is important to understand the distinction between a business and a company. This will help a person to decipher what type of coverage they need.

Business - A business is an individual or organization that engages in commercial or industrial activities operating on a for-profit or non-profit model.
Company - At a basic level, a company is a legal entity formed by a group of individuals to engage in business. 

The distinction between business and company centers on the fact that a company is a legal entity that is separate from the group of individuals that formed it. This provides limited liability exposure and special tax considerations. 

What coverage do I need?
For organizations that fall under the classification of business, D&O coverage is not your only option. In many cases a general liability, business owners policy (BOP), or an employment practices liability insurance (EPLI) policy paired with workers compensation will provide coverage. However there may be certain conditions related to your business structure or operating procedures that indicate D&O as the preferable option. 

A licensed insurance advisor can tell you what type of coverage is right for your business. Several factors determine coverage and coverage limits and a licensed advisor can guide you in the right direction with a few simple questions. CyberPolicy offers a number of resources for owners of small and medium sized businesses to plan for, prevent, and insure against costly litigation. Visit cyberpolicy.com or speak with a licensed insurance advisor by calling (844) 278-3674 for more details.

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