Management Liability aka “Executive Risk”
Running a business involves its share of risk and quite often the owners and executives have the greatest risk of all. Procedures and safeguards can be implemented but the only sure way to protect against management risk is proper risk transfer placement via insurance.
A number of different coverages are available to protect your company from management liability or what is also called “Executive Risk.” The insurance marketplace for these coverages is relatively broad.
Capitol Risk Solutions can often provide a Cost Indication based on preliminary information. Let’s talk about your options and how to mitigate your risk.
Directors & Officers Liability (D&O)
What is this coverage?At Capitol Risk Solutions, we like to explain that D&O coverage is very much like errors and omissions coverage for being a company executive. If your management team makes a business mistake such as: 1) causing another firm to lose money 2) restraint of trade 3) unfair trade practices 4) loss to shareholders and much more, D&O is a possible solution.
A D&O policy provides liability protection for directors and officers when claims are asserted for actual or alleged wrongful acts. The assets of the company/organization and the personal assets of the directors and officers are protected from the costs of litigation and any covered damages.
Why Is It Needed?Statistics show that shareholders are the most likely group to bring suit against these entities. However, suits do come from other sources such as competitors, customers, vendors and governmental and regulatory agencies. Allegations often include breach of duty, fraud, unfair business practices, infringement of trade secrets and other wrongful acts.
What Does It Cost?Cost can vary dramatically based upon the kind of business you operate. One of the key underwriting factors is financial underwriting. Underwriters will want to review your financial information in many cases. Premiums for non-profits are typically must less expensive that for- profit enterprises.
Non-Profits can be priced as low as $1500 for a 1 million dollar limit.
For-Profits are usually priced at $2500 to $3500 for smaller operations and closer to about $8000 to $10,000 for businesses with assets of 10 million or more.
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Employment Practices Liability (EPL)
What is this coverage?EPL policies can cover a number of lawsuits from your employees. However, the BIG THREE are Wrong Termination, Discrimination and Harassment. Sexual Harassment seems to be the type of claim that most associate with this coverage. However, Discrimination claims seem to be more common.
Ask your Capitol Risk Solutions representative about risk from Wage and Hour Claims. Most policies have no coverage or limited coverage. Let’s discuss your risk.
The EPL policy covers defense expenses, settlements and damage awards resulting from employee lawsuits alleging discrimination, harassment, wrongful termination, and other employment related claims.
Why Is It Needed?In today’s hyper active legal climate, there is always a need for this type of coverage. The trend of employee lawsuits continues to climb. Many employers only think of the “one off” claim…the single employee lawsuit. While this may be more common, a significant risk is the employee class action suit or a lawsuit brought by EEOC.
What Does It Cost?Premiums are directly related to the type of business and the number of employees. Those firms without previous claims can receive significant pricing credits.
Policies are typically written with limits of 1 million, 2 million,etc. Considering a 1 million dollar policy for an average business with 50 employees, the cost could range from $5,000 to $8,000 per year depending upon the deductible chosen..
What is this coverage?Fiduciary liability insurance responds to claims made against fiduciaries and trustees alleging breaches of duty imposed under the Employment Retirement Income Security Act (ERISA), including improper investments, plan and employee advice, insufficient funding, and failure for an insurer to perform in the administration and management of employee benefit plan.
Why Is It Needed?The individuals who administer Employee Benefit Plans are subject to personal liability under ERISA. Many fiduciaries believe that by utilizing a third party vendor (Fidelity Investments, John Hancock,etc) their liability is eliminated. This is not true. Fiduciaries are obligated to act solely in the interest of plan participants and beneficiaries, and are personally liable for any breach of their duties. Even with a participant directed 401(k) plan, fiduciaries can be held liable for a variety of reasons, such as poor investment options and failing to educate employees on their options.
What Does It Cost?Much of the time, the premium is related to plan assets in a 401k plan. However, there are many types of fiduciary arrangements. In general a 1 million dollar policy will cost about $1800 to $2000 for a company of 50 to 100 employees.
Kidnap & Ransom / Extortion (K&R)
What Is It?This coverage helps businesses guard against the significant costs associated with kidnapping and extortion, threats of bodily harm, property damage, product contamination, launching a computer virus or divulging trade secrets.
At Capitol Risk Solutions, we stress the value of the coverage but also the value of having a professional negotiator and professional extraction teams at your disposal should the worst case scenario take place.
Why Is It Needed?Doing business internationally as well as within the borders of the United States continues to become more dangerous for companies and key managers. Even if no ransom is paid, expenses such as those from negotiators, attorneys and forensic analysts can have a significant impact on company balance sheets.
If you have employees traveling to higher risk areas, well, it’s just the right thing to do.