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For-Profit Management Liability Coverage

Does Your Race Director Company Need Directors & Officers Liability Coverage?

Does your privately held/family owned business need D&O/EPL Insurance? Yes, given the discord that can arise by sibling rivalry, divorces and the overall litigious environment we live in. Consider the fact that people other than shareholders can sue directors’ and officers’. Shareholders bring less than half of all lawsuits agaist directors’ and officers’. The remaining lawsuits come from employees, customers, clients, competitors, other third parties and governments. Among the alleged wrongful acts for which directors’ and officers’ may be sued are failing to attend a meetig of directors’ & officers’, exceeding the authority granted by the charter or by-laws, granting imprudent loans that result in a loss to the company, failing to honor an employement contract, removing business from a vedor improperly and violating antitrust rules.



D&O Insurance Info:

D&O insurance can provide financial protection for a company as well as its directors’ and officers’. According to the Directors’ & Officers’ Liability Survey by Tillinghast-Towers Perrin, the average cost of defending against a D&O suit is $540,000. The average settlement or judgment is $5.65 million - and these figures are escalating.


Historically, D&O policies have provided coverage payable directly to directors’ and officers’ for losses arising out of allegations of negligence, omissions and wrongful conduct related to the management of the insured organization. The policies also have provided indemnity coverage to reimburse the policyholder companies for any indemnification provided to its directors and officers. In recent years insurers have added entity coverage as part of the D&O policy to protect the insured organization against losses arising out of its own acts.

Personal Liability of Directors’ & Officers’

D&O insurance can provide financial protection for a company as well as its directors’ and officers’. According to the Directors’ & Officers’ Liability Survey by Tillinghast-Towers Perrin, the average cost of defending against a D&O suit is $540,000. The average settlement or judgment is $5.65 million - and these figures are escalating.


For more information and quotes please contact:
JD Wallum JD.Wallum@ioausa.com
John D. Burkart, Esq.
John.Burkart@ioausa.com
300 S. Jackson St. Ste. 500, Denver, CO 80209



Types Of Plaintiffs

There are six major sources of directors & officers lawsuits:

1. Stockholders

  • Inadequate/inaccurate disclosure

  • Dishonesty/fraud

  • Financial Reporting

  • Disappointing financial performances

  • Fiduciary duty/gross negligence

  • Stock or other public offerings

  • Bid or threat by another company for takeover

2. Employees

  • Wrongful termination (most frequent claim)

  • Harassment

  • Defamation

  • Breach of Employment Contract

3. Customers/Clients

  • Dishonesty/Fraud

4. Competitors

5. Other Third Parties

6. Government Agencies

Need for Employment Practices Liability Insurance

Privately held companies also have a need for Employment Practices Liability coverage (in addition to D&O coverage) when one considers the following exposures:

  • Employement related suits are the fastest growing civil cases in the U.S.

  • During the 1990s, U.S. companies paid over $1 billion for employement related claims

  • Statistics show an employer is more likely to have an employment claim than a property or general liability claim

  • Employees win over 65% of all claims

  • 10% of all awards in cases involving discrimination and wrongful termination are in excess of $1,000,000

  • Over 15,000 sexual harassment claims are filed each year

  • A survey found that 70% or working women have been subjected to some form of sexual harrassment, and 52% of workig women have either been fired or forced to quit because of sexual harassment

  • States with the most complaints/claims per the EEOC: Texas, Florida, California, Illinois, and Georgia

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