Directors & Officers Liability Insurance
Directors and Officers Liability Insurance (often called D&O) is liability insurance payable to the directors and officers of a company, or to the organization(s) itself, as indemnifications for certain damages (losses) or advancement of defense costs in the event any such insured suffers such a loss as a result of a legal action (whether criminal, civil, or administrative) brought for alleged wrongful acts in their capacity as directors and officers (as to the individual directors/officers) or against the organization(s) (either for securities claims or – if private – other actions against the organizations themselves). Such coverage can extend to defense costs arising out of unproven criminal actions and regulatory investigations/trials as well; in fact, often civil and criminal actions are brought against directors/officers simultaneously. It has become closely associated with broader management liability insurance, which covers liabilities of the corporation as well as the personal liabilities for the directors and officers of the corporation.
A fidelity bond is a form of insurance protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees. These insurance policies protect from losses of company monies, securities, and other property from employees who have a intent to cause the company loss.
Fiduciary Liability Insurance
Fiduciary Liability Insurance pays, on behalf of the insured, the legal liability arising from claims for alleged failure to prudently act within the meaning of the Pension Reform Act of 1974. “Insured” is variously defined as a trust or employee benefit plan, any trustee, officer or employee of the trust or employee benefit plan, employer who is sole sponsor of a plan and any other individual or organization designated as a fiduciary. If you are an owner or officer who makes decisions about your company’s 401(k) plan or other qualified employee benefit plan(s), odds are, your personal assets are at risk! Under the Employee Retirement Income Security Act of 1974, fiduciaries can be held personally liable for losses to a benefit plan incurred as a result of their alleged errors, omissions, or breach of their fiduciary duties. Fiduciary Liability Insurance is not required by ERISA. However, it is strongly recommended if you are a fiduciary of a welfare and/or pension plan because your personal assets may be at stake. Many fiduciaries believe incorrectly that their ERISA fidelity bond protects their personal assets.
Employment Practices Liability Insurance
Protects your firm from claims arising from employees who are terminated for cause and then sue you for discrimination, wrongful termination, loss of earnings, sexual harassment, slander, defamation etc. Companies are finding that they are vulnerable from the pre-hiring process through the exit interview, even if the employee was never hired, or only at the company a matter of days. It can happen to ANY firm. Every employer faces the reality that it may be the target of legal action from past, present and prospective employees. Even if the claim is groundless or fraudulent, the defense of a suit can be expensive in time, resources and financially. It’s still your firm that gets sued, and you can’t always monitor every hire, termination, or conversation that takes place in your office.
ERISA is the Employee Retirement Income Security Act, a federal law enacted in 1974. ERISA established minimum standards for plan administrators and investment advisers to protect employee pension and health plans in the private sector. ERISA requires that plan officials who manage, oversee, recommend or handle funds or other property of an employee benefit plan must be covered by a personal fidelity bond, according to the U.S. Department of Labor. The bond purpose is if a plan official commits fraudulent or dishonest acts, his bond ensures that the pension or health fund can recover some of its losses. The bond only pays if the fraudulent administrator is financially unable to meet his obligations.
A surety bond is a contract between three parties—the principal (you), the surety (them) and the obligee (the entity requiring the bond)—in which the surety financially guarantees to an obligee that the principal will act in accordance with the terms established by the bond.
This material is for informational purposes only and not for the purpose of providing legal or insurance advice. Insurance coverage and the terms and conditions relating to such coverage will vary. No representations or promises are made that any particular insurance coverage will be available to any individual or entity seeking such coverage. Integro is not a law firm and does not provide legal advice. If such advice is needed, consult with a qualified advisor.
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