More public companies going bankrupt means more problems for directors and officers. If you find yourself in a litigation storm, specialized insurance solutions can be a lifesaver. Additional policies may offer more protection than just a directors and officers (D&O) policy. With bankruptcies on the rise, getting your protection right is more important now than ever.
The recent surge in bankruptcies stem from several factors, including:
When a business struggles financially, stakeholders, including shareholders and employees, seek accountability for management’s decisions. Lawsuits may arise from dissatisfaction with the outcomes. You could be subject to litigation alleging breaches of fiduciary duty, mismanagement, failure to comply with contractual obligations, and more. Having the right insurance policies can play a vital role in mounting an effective defense.
Side A policies play a crucial role in protecting individual directors and officers during corporate crises or bankruptcies. Unlike traditional policies, Side A coverage is dedicated solely to individual executives and does not get diluted by claims against the entity. This means it remains intact to fund defense, settlements, or judgments for the personal liability of directors and officers.
Due to cost-effectiveness and broader coverage, Side A policies have gained popularity. In situations where budget constraints are a concern, Side A coverage offers a viable solution. Savvy attorneys know: a well-structured D&O program protects both the company and directors. Adding Side A coverage enhances individual protection — its limits are competitively priced with fewer exclusions compared to full programs.
For the uninitiated, the difference between professional liability and management liability is often missed. Education and awareness are crucial in bridging this knowledge gap to assure coverage is proper and complete.
Robust insurance solutions are a great line of defense, but you must adapt your insurance strategy in parallel with the current bankruptcy landscape. Work closely with an experienced broker, claims advocacy group, and carriers to develop a well-rounded support plan. Understanding the nuances of bankruptcy scenarios is vital. As the industry navigates these challenges, embracing specialized coverage can make a significant difference.
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Connect with the Risk Strategies Management Liability team at MLPG@risk-strategies.com.