D&O Liability Insurance Available Through MBIS
Directors & Officers Liability insurance (D&O) is designed to protect the personal assets of an insured person (usually past, present or future bank directors, officers and employees). Coverage is expanded to include the holding company, bank and subsidiaries as well. The policy is intended to provide coverage for losses arising from management practices and wrongful acts. This includes actual or alleged errors or omissions, misleading statements, misstatements, breach of duty, and negligence in performance of duties.
Below is a brief bird’s-eye overview of the various insuring agreement language in a financial institution D&O Liability policy:
Executive Liability – Provides coverage to insured persons regarding management practices and wrongful acts. This insuring agreement is triggered when the bank or holding company is unable to indemnify the insured person due to insolvency, when prohibited by law, or if the company is incapable of indemnifying or decides not to indemnify.
Company Reimbursement – Provides coverage to the company (bank, holding company and subsidiaries) when the company indemnifies the insured persons for a management practices wrongful act claim. The majority of D&O claims are covered under this section of the policy.
Company/Bankers Professional Liability – Provides blanket coverage for the professional services the company or subsidiaries offer its customers which include, but are not limited to, insurance sales liability, investment representative liability, depositor liability, non-electronic banking privacy liability, and administration of HSAs, IRAs and Keogh accounts.
Lender Liability – Provides coverage to the company and insured person (if not covered under Executive Liability and Company Reimbursement) for lending wrongful acts, which can include the failure or refusal to extend credit, denial of credit, violation of consumer lending law, wrongful foreclosure, and servicing of loans under a written contract.
Company Securities Liability – Provides coverage to the company and insured person (if not covered under Executive Liability and Company Reimbursement) for shareholder matters regarding the sale or purchase of shares in the company.
Employment Practices Liability – Provides coverage to the insured person and company for employment-related matters which include, but are not limited to, failure to employ, wrongful termination, coercion, demotion, reassignment, discipline, defamation, sexual harassment, humiliation and discrimination.
Third Party Harassment – Provides coverage to the company and insured persons for harassment claims brought by individuals other than bank employees. Harassment includes, but is not limited to, libel, slander, sexual harassment, humiliation, discrimination (other than lending), false arrest, false imprisonment, etc.
Fiduciary Liability – Provides coverage to company and insured persons for fiduciary wrongful acts which include, but are not limited to, misstatement, misleading statement, error or omission or neglect, breach of duty by the company or an insured person serving in their capacity as fiduciary for any employee pension or welfare benefit plans sponsored by the company or for administering such plans.
Trust Department Liability – Provides coverage to the company and insured person for a trust department wrongful act.
Directors & Officers Liability policies are not created equal; each carrier has their own policy language. A strong D&O policy is vital in attracting and maintaining qualified directors and officers.