Forums: Discussions for entrepreneurs and small business.

I have a new client who is telling me before I can provide services to them, I
must show proof of corporate directors and officers liability insurance
coverage of at least $1,000,000. I`ve never really thought about getting that
type of insurance before, can anyone give me advice? Exactly what does it
cover, and how much can I expect to pay? We`re only a two person company
at this point, but we are incorporated (S corp) and everything filed properly.

Advice?

Thanks,

Chris Miller

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Hi Chris,

I`m too lazy to copy all of what it covers so here`s a gif of the coverage a basic policy of the sort, this one is for 2 million so the amounts may vary but the items should be pretty much the same.




Hope it helps,

Elí

How much should I expect to pay for that kind of policy?

EDIT: Oh, I see it now.. thanks.

Thanks,

Chris Miller

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The post above is not providing D&O insurance. It appears more like a business owner’s policy which combines several types of insurance.  D&O is exactly what its name is, Directors and officers insurance.  It covers the company and its D&O for claims associated with their actions in fulfilling their positions in the company.  It is most commonly called in to play for litigation associated with things such as stock price variations or poor management decisions that negatively impact the corporation’s shareholders.  The policy covers the corporation’s obligations to re-emburse the D&O’s for costs as well as the corporation’s own related costs.  There is a lot of information on the web related to this but here is a good explanation.

http://library.findlaw.com/2000/Jan/1/241472.html

 

The question that you may want to ask of your client is why exactly do they want this coverage.  Unless your client has an insurable interest in your company’s financial wellbeing this coverage would provide them no benefit.  Further, this is not a coverage that companies typically share with their clients.  I think perhaps they are looking for Professional Liability insurance which is sometimes attached to a D&O policy but can also be obtained separately.  This type of coverage would cover someone acting in a professional capacity, such as a Professional Engineer.

 

Hope this helps.