Just because your company is not publicly traded, don’t think your are exempt from lawsuits! Directors and Officers Insurance (D&O) can protect your company from lawsuits brought about by the actions of your officers and directors.
An August 2013 report, “The Private Eye: Spotlight on the US private D&O market” found that while 46 percent of D&O claims were brought about by shareholders, 33 percent were brought on by clients and 21 percent are brought on by vendors. So, regardless of your company’s size, it still has clients, customers, and vendors, all of whom are potential plaintiffs.
In addition, if you are considering merging with another company or being acquired, “…in 2011, 96 percent of all merger and acquisition (M&A) deals resulted in a lawsuit against directors and officers,” according to D&O Compass, an industry publication.
A number of regulatory agencies are increasing their level of scrutiny over private firms. Recently, the Department of Justice has ramped up the enforcement of the Foreign Corrupt Practices Act (FCPA) against private companies. Almost 40 FCPA case settlements in 2012 were made with private companies.
Risk managers should be aware of the need for private company D&O coverage, however only 28 percent of all private/nonprofit companies with revenues under $100 million purchased the coverage. You should consider protection against lawsuits. To learn more, contact ERM Insurance at (949) 222-0444.
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