Products & Services

What is D&O Liability Insurance?

Directors and officers liability insurance (D&O) protects the company and personal assets of the individual corporate executives if they are sued by vendors, competitors, investors, clients, or regulators for actual or alleged wrongful acts in managing a company. D&O insurance is also referred to as management liability insurance.

Doesn’t General Liability or an Umbrella policy cover these types of losses?

No.  Management liability issues are not in the scope of a General Liability or an Umbrella policy.  In the payments industry, the rule of thumb is that General Liability covers generally nothing.

 

Isn’t D&O insurance only for public companies?

No, however private companies face many of the same types of lawsuits that public companies do.  The average cost of a D&O claim for private companies is approximately $700K according to the Chubb 2013 Private Company Risk Survey.

Private equity and venture capital firms will typically require evidence of D&O coverage when buying or selling a company to protect their investment.

Individuals asked to serve on the board or an executive capacity for a company will typically require evidence of D&O insurance to protect them individually.

 

Claim Scenarios

An acquisition of an overleveraged payment processor that ultimately filed for bankruptcy resulted in an attempt to claw back $47M from the former CEO, alleging financial misstatements and fraudulent transfers.

The FTC alleged that payment processors were complicit in facilitating a merchant to defraud customers of over $275M.  The individual executives of the processors received regulatory judgements of $3.3M, $1M, and $328K, in addition to incurred defense costs and levies on personal assets.

The FTC went after the former president of a payment processor for its role in facilitating payments for a merchant that allegedly made deceptive robocalls for credit card rate reduction.  The defendant incurred legal costs and a $1.7M judgement.

One of the largest payment processors sued a competitor alleging unfair trade practices.  The plaintiff demanded three times damages and lost profits from the defendant.

The CFPB fined a fintech payment company alleging it made false representations regarding its data security practices.