AXIS INSURANCE SERVICES, LLC: The Management Liability Insurance Specialists
The legal landscape for directors and officers and board members has become increasingly complex with emerging risks such as data privacy claims, greater shareholder activism, environmental litigation, and an increase in securities class actions and merger-objection suits. It’s not only public companies that face management liability claims but also private and non-profit entities that are targets of allegations of unfair business practices, conflicts of interests, mismanagement of funds, release of non-public information, and other issues.
Directors & Officers (D&O) solutions from Axis Insurance Services, LLC are designed to protect the executive management team of public, private, and non-profit companies from claims against them relating to their daily management decisions. Our D&O policies provide coverage for the directors and officers themselves; reimburse the company when it indemnifies its directors and officers’ costs; and protect the corporate entity itself. A policy will pay for legal fees and indemnity payments for settlements or losses in court.
Inside D&O Insurance
Each insurance carrier specializes in supporting a particular industry and therefore the forms of each company may vary. The professionals at Axis Insurance Services, LLC work with each of these companies and can tailor a program specific to your needs. We pay close attention to the following:
- Coverage Parts: A – Directors & Officers, which provides coverage to protect the individual assets of directors and officers; B – Indemnification of Officers, which reimburses the business for costs of claims against directors and officers when the company indemnifies them; and C – Entity Coverage, which provides protection for the company itself when it is listed as a defendant in a claim.
- Policy Limits: Standard limits for most small to medium-sized organizations start at $1M, but most public companies buy at least $5M in coverage. Companies typically buy an individual claim amount and an aggregate limit. For example, a minimum policy may be $1M/$2M. This means that the insurer will pay a maximum of $1M for any one claim, but will pay an aggregate amount of $2M in the given policy year. This could mean one million dollar claim and up to 10 $100,000 claims.
- Claims Made Coverage: Almost all polices are written on a claims-made basis. However, almost all policies have an extended reporting endorsement meaning when you cancel the policy you may purchase coverage for a period of time at a predetermined rate covering claims that may come in later relating to the expired policy period. That rate can vary from 75% to 250% or more of the expiring premium. Usually, that rate is not negotiable; however, we will evaluate the cost between carriers.
- Make Sure the Policy Covers the Company Itself: We will check to make sure that the coverage for your entity is included in the policy as well as for individual directors and officers.
- Do Your By-Laws Indemnify the D&Os? A D&O policy is triggered by the policyholder’s legal obligation to defend a case or pay a settlement. If directors and officers are not indemnified in the Corporate By-Laws, the company has no legal obligation to defend them and therefore, even though the company may have a policy, no coverage may be available.
- Does Your Policy Segregate Defendants? Most D&O policies will exclude coverage for fraud or other criminal activities. Although, insurance policies should not provide defense for criminal actions, they should provide defense for the company and other innocent parties that might be pulled into a lawsuit due to a criminal action on the part of someone else. Without a segregation clause, the other defendants may be without any coverage if one of the other D&Os or even an employee commits a criminal act.
- Does your Policy Cover Fines, Penalties, or Punitive Damages? The actual settlements for large D&O cases involve not only actual damages, but also punitive damages, which most policies specifically exclude.
- Employment Practices Liability: Most D&O policies can provide some form of coverage for EPLI relatively inexpensively. This coverage is not as comprehensive as a stand-alone policy and usually has a high deductible with less actual coverage. We can provide you with comprehensive Employment Practices Liability.