D&O and Fiduciary Liability

Directors & Officers Liability Insurance (D&O) provides coverage against “wrongful acts” which might include actual or alleged errors, omissions, misleading statements, and neglect or breach of duty on the part of the board of directors.

Fiduciary insurance provides protection against claims for mishandling or misappropriating funds of others. A common fiduciary responsibility is the management and control over a company’s 401(k) and pension plans. Directors and Officers can be held individually responsible for the mismanagement or misappropriation of assets held on behalf of others. Lemme has expertise and experience in delivering custom insurance and risk management solutions for those who act in a fiduciary capacity.

An important feature of a D&O insurance policy is defense costs coverage. The cost associated with defending an allegation of a wrongful act can easily and quickly exceed $50,000.

Listed below are examples of common D&O exposures:

Allegation of Wrongful Acts

•Conflict of interest
•Fraudulent conduct, reports, financial statements or certificates
•Breach of conduct
•Violation of statutes
•Violation of provisions of articles or by-laws
•Improper self-dealing
•Acquiescence in conduct of fellow directors engaged in improper self dealing
•Transactions with companies in which officers or directors re personally interested

Allegation of Financial Mismanagement

•Inefficient administration resulting in losses
•Sale of assets for unreasonably low prices
•Wasting of assets
•Extension of credit where not warranted
•Failure to ascertain whether extension of credit is warranted

Allegation of Mistakes or Errors in Judgment

•Disclosure of material facts
•False or misleading reports
•Dissemination of false or misleading information
•Permitting organization to make improper guarantees

Allegation of Negligence

•Continual absence from meeting
•Failure to examine reports and documents before signing
•Failure to detect ad stop embezzlement of organizational funds
•Failure to file annual report
•Failure to require withholding tax
•Failure to inspect organization books and records to keeps abreast of its activities
•Failure to supervise the activities of others in a proper manner
•Failure to verify facts in official documents before signing them and filing them
•Shirking responsibility

If your organization has any situations similar to the examples listed above, it is strongly recommended that D&O insurance coverage be secured.