Being an executive today in a for-profit or non-for-profit business presents significant personal financial exposure. You may find yourself in court over the way you operate your business to the way you sell it. Even the practice of hiring and promoting employees can become very unpleasant. Issues such as these regularly make the financial journals and local newspapers.
Don’t forget you don’t have to do anything wrong to be sued.Legal fees can run into the hundreds of thousands of dollars. Directors and Officers Insurance provides for this important need.
Real Company Examples
A state government filed a criminal indictment against a construction company’s directors and officers claiming conspiracy and bribery.* The company was awarded a state construction contract after allegedly participating in fraudulent fundraising activities which included the formation of a political action committee and the making of various campaign contributions. Further, the state maintained that the company had submitted invoices for work not performed and fraudulently overstated costs associated with the project. Travelers paid $4.2 million in legal defense fees.
After a joint venture between the parties failed, the plaintiff claimed the insured organization took his ideas and developed its own product, allegedly retaining and using the intellectual property to create a competing product. Travelers paid in excess of $200,000 in defense expenses, in addition to making a $50,000 contribution toward the settlement.
A minority shareholder invested in an agricultural supply company after reading the board’s business plan, which included a detailed list of steps management intended to take in order to achieve superior financial results.Due to in-fighting on the board, a number of steps were never followed, resulting in lower than anticipated profits. The minority shareholder sued for breach of fiduciary duty and misrepresentation. Travelers paid defense expenses in excess of $150,000 before the case ultimately settled for $220,000
Two minority shareholders filed suit against the board of directors after a less-than-stellar year. The plaintiffs claimed the board breached its duty to the shareholders by mismanaging the business, which resulted in a loss, despite previous forecasts of a significant profit. The plaintiffs further alleged that the board misrepresented the state of the market, which influenced their decision to invest. Travelers paid $300,000 in defense expenses before ultimately settling the case for $500,000
Could it be you in one of these examples? To find out more about this product and other products and services, contact us today.