• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Facebook
  • LinkedIn
  • Twitter
Bast Amron

Bast Amron

Miami Business and Bankruptcy Litigation Law Firm

  • Home
  • Who We Are
  • Our Team
  • What We Do
    • Litigation
    • Insolvency
    • Business
  • Our Work
    • Representative Experience
    • Case Highlights
    • Client Insights
  • News
    • Client Alerts
    • BA Blog
    • Articles
    • Events
    • In The News
    • The Practice Podcast
    • Business Advantage Forum
    • Careers
  • Contact Us

The Importance of D&O Insurance

The Importance of D&O Insurance

October 30, 2019 by Maylynn

October 30th, 2019 - Posted in BA Blog

As discussed in Part I of this series, directors and officers can be sued for a variety of reasons related to their company roles including breach of fiduciary duty, fraud, misrepresentation of company assets and lack of corporate governance.

In Part II, we’ll look into why D&O insurance for directors is essential, since it is the financial backing for standard indemnification provisions, and protects the personal property and wealth of corporate directors and officers and their spouses. 

During the financial crisis of 2008, many boards of directors were caught unaware of their corporation’s fraudulent practices. As bankruptcies became common, especially in banks and other financial institutions, many companies were forced to write off large, uncollectable debts. As a result, consumers tighten up and stopped buying goods and delayed making major purchases. The chain affected nearly every industry, including real estate, tourism, cars and luxury items. Shareholders, creditors and employees were the only option of claiming a dividend in bankruptcy and for many, this meant their only recourse was to file a claim against the company’s D&O insurance policy, which was the last remaining assets. 

The financial crisis also led to new security laws and regulations which require increased communication and transparency to shareholders and the public. Corporate boards must now disclose the details of compensation packages and follow proper authorization procedures. 

These changes have caused board directors and officers to take on a greater degree of personal liability over issues of mismanagement and nondisclosure. According to Allianz, a major insurance company, there has been an increase in the following areas: 

  • Aggressive plaintiff litigation strategies;
  • Increased loss severity;
  • Increased regulatory scrutiny; 
  • Increased financial restatements, and; 
  • Significant D&O claims payments. 

Claims against D&O insurance companies are often multifaceted and highly complex. Even the best-intentioned board of directors and officers can make mistakes, especially given the progression of corporate governance. Directors and officers, along with their spouse, have much at stake from a personal and professional standpoint. 

Before accepting a seat on a board, directors and officers should ensure that the company has a D&O policy and ask a trusted attorney to review it on their behalf. The risk of allegations is higher than ever, as is the cost of claims. Directors and officers shouldn’t underestimate the importance of a D&O insurance policy. 

As discussed in Part I of this series, directors and officers can be sued for a variety of reasons related to their company roles including breach of fiduciary duty, fraud, misrepresentation of company assets and lack of corporate governance.

In Part II, we’ll look into why D&O insurance for directors is essential, since it is the financial backing for standard indemnification provisions, and protects the personal property and wealth of corporate directors and officers and their spouses. 

During the financial crisis of 2008, many boards of directors were caught unaware of their corporation’s fraudulent practices. As bankruptcies became common, especially in banks and other financial institutions, many companies were forced to write off large, uncollectable debts. As a result, consumers tighten up and stopped buying goods and delayed making major purchases. The chain affected nearly every industry, including real estate, tourism, cars and luxury items. Shareholders, creditors and employees were the only option of claiming a dividend in bankruptcy and for many, this meant their only recourse was to file a claim against the company’s D&O insurance policy, which was the last remaining assets. 

The financial crisis also led to new security laws and regulations which require increased communication and transparency to shareholders and the public. Corporate boards must now disclose the details of compensation packages and follow proper authorization procedures. 

These changes have caused board directors and officers to take on a greater degree of personal liability over issues of mismanagement and nondisclosure. According to Allianz, a major insurance company, there has been an increase in the following areas: 

  • Aggressive plaintiff litigation strategies;
  • Increased loss severity;
  • Increased regulatory scrutiny; 
  • Increased financial restatements, and; 
  • Significant D&O claims payments. 

Claims against D&O insurance companies are often multifaceted and highly complex. Even the best-intentioned board of directors and officers can make mistakes, especially given the progression of corporate governance. Directors and officers, along with their spouse, have much at stake from a personal and professional standpoint. 

Before accepting a seat on a board, directors and officers should ensure that the company has a D&O policy and ask a trusted attorney to review it on their behalf. The risk of allegations is higher than ever, as is the cost of claims. Directors and officers shouldn’t underestimate the importance of a D&O insurance policy. 

Primary Sidebar

  • Client Alerts
  • BA Blog
  • Articles
  • Events
  • In The News
  • The Practice Podcast
  • Business Advantage Forum
  • Careers

Bastamron Youtube Podcast

Bastamron Google Play Podcast

Bastamron Spotify Podcast

Bastamron Apple Podcast

Maylynn Menoud  | Marketing Director
T: (305) 379-7904 | D: (305) 357-4794
mmenoud@bastamron.com

BAST AMRON is a boutique law firm focused on business insolvency and litigation. Our insolvency practice emphasizes workouts, restructurings, liquidations, bankruptcy, and bankruptcy avoidance. We represent debtors, creditors, committees, trustees, and other fiduciaries in bankruptcies, receiverships, and assignments for the benefit of creditors. Our litigation practice is primarily plaintiff oriented. We know how to investigate, formulate and prosecute claims arising from business disputes. By combining our business insolvency knowledge with our extensive courtroom experience, we successfully guide our clients through all aspects and types of commercial litigation in state and federal courts across the country. Whether the issue is litigation or insolvency or both, we view our clients’ needs through a holistic lens to formulate and implement dynamic solutions to their most important challenges.

Footer

Copyright © 2023
Bast Amron LLP. All rights reserved.
Attorney Advertising. Prior results do not guarantee a similar result.

Careers | Sitemap | Disclaimer | Eco Friendly

One Southeast Third Avenue,
Suite 2410 | Miami, FL 33131
T: 305.379.7904 | F: 305.379.7905
Return to top
  • Facebook
  • LinkedIn
  • Twitter