Risk & Business Magazine General Insurance Service Spring 2021 - Page 6


How COVID-19

Impacted D & O Insurance

Directors and officers are responsible for making the tough choices that can make — or break — a company ’ s fortunes . In doing so , they must consider the best interests of employees , customers , and shareholders while also keeping in mind corporate best practices . Limited or imperfect information and tight deadlines add to the overall complexity of the decision-making process and can lead to poor outcomes or even outright mistakes .

To hire and retain talented directors and officers , companies need to give them the freedom to make corporate decisions without the fear of being personally liable for losses stemming from those decisions .
That is where Directors & Officers ( D & O ) insurance comes into play , and it is a critical piece of your management liability policy . It is designed to protect individuals acting in their capacity as a director or officer of an organization against the consequences of any alleged or actual “ wrongful acts ” they commit while performing regular supervisory duties .
These wrongful acts can include any of the following :
• Regulatory violations , such as violations of workplace laws
• Misrepresentation of company assets
• Legal risks from day-to-day operations
• Misuse of company funds
• Litigation over mergers and acquisitions
• Conversions to employee stock ownership plans
• Accusations of mismanagement by stockholders
Included in your D & O insurance would have been coverage for the lack of preparation many businesses experienced during the pandemic . Claims have been filed for management decisions related to lost revenue , increased expenses , employee and customer safety , damage to company image , decisions to close or not to close , and layoffs and furloughs .
Without D & O insurance coverage , executives ’ personal assets are at risk in the event of a lawsuit .
The pandemic , in many ways , created D & O exposures that were not there before . D & O claims resulting from COVID-19 have changed our perception of what can and cannot result in a lawsuit .
For example , during the pandemic , Amazon employees staged a walkout after they determined that their working environment was unsafe . Any lawsuit related to this would be a claim against the company ’ s D & O insurance policy because decisions regarding working conditions are effectively the responsibility of corporate directors and officers . In fact , there are lawyers lined up to file claims like these all over the country .
Many states are considering instituting COVID immunities for businesses to address the influx of claims , but of course , this takes time . In the meantime , a D & O insurance policy saves you the stress of putting resources out to cover these claims .