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Make Sure Your Company Has Comprehensive D&O Insurance Coverage

By William Vogeler, Esq. on May 10, 2018 | Last updated on March 21, 2019

It is a little awkward, but sometimes you have to ask: "Do you have protection?"

Of course, we're talking about liability insurance for the board. It could protect against much more embarrassing questions later, such as: "What are your personal assets?"

These questions are just as important in the boardroom as any other room. If you are the company attorney, it's your job to ask them.

Your Board's Liability

Most responsible companies have director and officer liability insurance policies, but the lawyers have to read them. It's important because policies too often do not provide the coverage the company really needs.

For a price, insurance riders can cover a multitude of sins. Corporate counsel owes due diligence to the company -- and its directors and officers -- to make sure their specific concerns are covered.

Olga Mack, writing for Above the Law, says to ask questions now to avoid risk later. Start by making sure board members:

  • Understand corporate governance
  • Perform their duties diligently
  • Engage in good decision-making
  • Educate themselves about business risks

Of course, they should also work closely with corporate counsel.

Your Asset Protection

If you are invited to join the board, congratulations and condolences. Now asset protection is getting personal.

For example, reputational risk is not typically covered by D&O insurance. And in the digital age, reputations are lost in an internet minute.

So you need to do your own due diligence about the company. Ask tough questions about the board such as: "Who are these people?"

Criminal records are rare among board members, but doing a background check is easier than responding to an investigation by the Federal Bureau of Investigation or the Securities and Exchange Commission.

It's a probing kind of job, but somebody has to do it.

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