Often, the management hierarchy within your insurance agency varies considerably. The CEO and other officials often have special needs compared to a standard agent. Therefore, they will likely need specific liability insurance. That's because their decisions will have wide-reaching impacts. What coverage, therefore, will help if a mistake occurs?
Most agency principals will benefit from directors & officers (D&O) insurance. If you will make significant decisions regarding the course of the business, consider this coverage practically mandatory.
Understanding D&O Insurance
Most businesses carry a variety of professional liability insurance policies. Insurance agencies are no exception. Professional liability insurance will cover a variety of mistakes an operation might cause in the course of its clerical practices or professional advice. For example, if you misquote or mismanage a policy, and cost your clients lost coverage and money, you might have to compensate them. Professional liability coverage might help in this regard.
D&O insurance exists under the general umbrella of professional liability coverage. However, it more specifically applies to the movers and shakers of the operation. Agency principals make critical decisions all the time. There is always a chance their mistakes could prove costly to the business and clients. Therefore, they might have to protect themselves from personal financial losses.
Suppose that a massive lawsuit arises against an agency CEO. The suit targets them and their decisions personally. They could not only lose the business, but also their personal assets. A properly managed D&O policy can protect most of the assets that the principal values. That is why it often proves so critical to overall business security.
Making a D&O Claim
Since D&O insurance is only one of many liability policies out there, it will only cover certain claims. Principals must understand what they can claim, and what they cannot. Covered instances under your policy might include suits and settlements related to:
- Failure or breach of fiduciary duty
- Mismanagement of company funds
- Violation of industry regulations
- Prospectus misrepresentation
- Poor stock performance
Certain cyber liabilities and employment practice violations might also have coverage. However, such incidents have targeted liability policies which might be a better fit. Furthermore, your policy won't cover many common workplace liabilities. Bodily injuries and property damage won't have coverage, for example.
Illegal actions, fraud and claims of profiteering won't have protection either. Yet, as long as you operate ethically and responsibly, you will likely find D&O insurance a benefit.
Consider D&O insurance a bedrock of your agency's protection. Add it to your own portfolio before you go the aid of clients.
Also Read: D&O Insurance Equals Personal Protection