CLIENT ADVISORY
RECOMMENDATION:
PERSONAL/INDEPENDENT DIRECTORS LIABILITY
All corporate primary D&O and Employment Practices Liability policies, whether for-profit or not-for-profit, are inherently restrictive to the individual directors. Examples follow:
a. May not respond for individual director’s personal liability if facts support a violation of law, such as Sarbanes-Oxley.
b. Corporate policy limits may be eroded or exhausted by earlier reported claims in the same policy year.
c. Corporate policy could be terminated if there is a change of control.
d. Tail liability may be mishandled by acquiring company in a merger or acquisition.
e. Employment Practices class action claim reserve could exhaust available limits.
f. Securities claims exclusions.
g. Restrictive “Hammer” settlement clauses.
h. Sexual Misconduct exclusions.
i. Pollution and ERISA exclusions.
Those who act as “Advisors” to for-profit or not-for-profit entities have the same primary risks as if they were Directors and Officers, if they engage in the types of activities commonly provided by a Director or Officer, including:
a. Employment discussions
b. Acquisition or divestiture discussions
c. Executive compensation
d. Discussions concerning the not-for-profit status
e. Grant making to third parties
f. Review of financial reports
g. Serving on a Finance or Audit Committee
Recommendation: Consider an Independent/Personal Directors & Officers proposal.
Feel free to call should you wish to discuss these comments and recommendations.
Ken R. Butler
Ken R. Butler, CPCU, ARM
President & CEO
KRB/md
Ken R. Butler is the President & CEO of Legacy Risk Solutions, LLC. Mr. Butler is an entrepreneur and industry leader in the analysis of affluent family and business risk management needs and development of legacy preservation plans.
Fee Only – No Commissions – No Conflict of Interest
This article is a general discussion about the subject matter and should not be represented as applicable in any state in the United States of America. This document is for the exclusive use of Legacy Risk Solutions, LLC clients. It shall not be reprinted or portions reproduced in any form, by any other party, without the permission of the author. Author Contact: 330.659.6337 or 330.283.0952, or KenBLegacy@aol.com. The Legacy Risk Solutions website is: www.legacyrisksolutions.com.
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