Directors and officers of private companies are subject to the same legal standards of conduct as their public company counterparts. Claims against companies and organizational leaders are increasingly common and complex. Faced with costly litigation, companies without appropriate insurance could put corporate assets and the personal assets of directors and officers at risk.
Here are some examples of claims filed against Directors & Officers policy coverage –
Government Action – Cost: $1,500,000
Description: After their new accountant discovered errors made by the previous accountant in the prior year’s financial statements, a manufacturer of construction materials received a letter from a state government entity alleging the insured and multiple company officers had misrepresented the company’s financial condition in order to procure government bonds.
Counterclaim – Cost: $250,000
Description: A real estate services company filed suit against a competitor and former employee alleging the former employee took client information and trade secrets, which he then used in his new job with the competitor. The competitor then filed a counterclaim against the insured entity and CEO, alleging the CEO contacted multiple companies that were current or prospective clients of the competitor to conduct a smear campaign and gain unfair advantage. The counterclaim alleged tortious interference with prospective business relations.
Bankruptcy Claim – Cost: $980,000
Description: The bankruptcy court appointed an examiner to investigate potential fraudulent conduct by directors and officers of a retail company. The investigation included possible involvement of the CEO and CFO in a loan scheme perpetrated by a founder of the company. The founder allegedly fraudulently obtained loans upwards of $1B. As a result, the insured’s properties were seized, and its assets were frozen, crippling its business and resulting in the bankruptcy filing.
Competitor Dispute – Cost: $1,830,000
Description: A competitor filed suit against a manufacturing company and several directors and officers alleging the insured poached employees and misappropriated sensitive, confidential, and proprietary business and technical information. The complaint also included allegations of tortious interference and civil conspiracy against both the entity and the individual defendants.
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