1. STAFFING Q4 2009
AssuranceEdge
Helping Today’s Professionals Stay on Top of the Insurance Marketplace
Private Company D&O – Reality Check
For many private companies, Directors’ and Officers’ Liability Insurance
might appear to be a ploy by the insurance industry to manufacture a
“need” to purchase extra insurance. It’s understood that all companies
have to carefully consider how they spend their expense dollars at any
point in time. The decision by private companies to not obtain D&O
insurance protection is typically based upon the extra cost. This article
will expose the risks which exist in the business environment that would
be covered by D&O insurance far outweigh the downside of a minimal
expense outlay.
Simply stated, D&O insurance is designed to provide financial
protection for claims brought against a company’s directors and officers
by third parties for situations caused by management’s performance,
non-performance, errors, omissions, misstatements and/or misleading
statements. More specifically, a D&O policy will indemnify a director or
officer against loss arising from a claim made against the same during
the period of coverage in respect of a “wrongful act”, “loss” or “claim”, as
defined in the policy. A claim might originate from one of several sources including banks, creditors, employees,
labor unions, government agencies, outside investors, customers and vendors. A private company might benefit
from the protection that a D&O policy provides under the following scenarios.
• An outside party is asked to sit on your company’s board and seeks indemnification from the company
to do so. Most companies, public and private, can provide the appropriate corporate indemnification.
However, many individuals who assume these positions of leadership desire something with more certainty
and the financial backing of a third party. In this case, a D&O policy can fund that indemnification (and
legal defense costs) if a claim were to be filed, the insurance company provides the financial stability
behind the D&O policy.
• Management and ownership succession is always a complex matter. Unfortunately, many individuals and
companies avoid dealing with this serious issue until it is too late. In situations where management and/
or ownership control of a company passes from one generation to the next, it is possible that not all of
the “second generation” view or benefit from the transaction equally. If there is a disagreement over the
succession planning and suits are filed, a D&O policy could possibly provide the financial protection
necessary to assist the company and/or individual directors and officers in handling the matter.
• A company facing bankruptcy is always a concern for those in positions of leadership. The concern
heightens for the directors and officers as the corporate indemnification mentioned above will not serve its
purpose if the company in question is financially incapable of funding the indemnification and associated
legal expenses, which can be quite significant. A D&O policy can act as a funding mechanism for
indemnification purposes and legal costs in the event a claim is filed. The upfront costs for this protection
compared to the potential ultimate cost of a D&O claim are negligible for this protection.
Most D&O policies are designed to provide both “Side A” and “Side B” coverage,
as they are commonly referred to. Side A coverage is for directors and officers of
a company that does not indemnify them for the costs of defense, settlements or
judgments against them. Side B coverage provides reimbursement to a company
which does provide indemnification to its directors and officers. Of course, it is
important to read the policy in detail to ensure that both these provisions exist
in the policy before deciding to purchase the coverage. It is recommended that
you consult your trusted advisors such as your attorney, accountant and insurance
broker to determine if you have the appropriate protection for your business.

2. Q4 2009
Leadership and Communication are Key for
Targeting a Successful Wellness Program
Wellness is a word with many definitions. Have you successful wellness program. It can
ever stopped and asked what wellness really means to come in many different forms, but the
you and your company? Or, more importantly, have key is to incorporate a multi-faceted
you ever asked what wellness does for your company communication approach to be sure you
and your employees? The increase in employer obtain the return on investment
sponsored wellness programs has jumped drastically you are seeking. Employees
over the last several years. Employers are generally need an understanding of
consistent in the results they want from any wellness how involvement in the
programs they implement: wellness program will benefit
• Lower health insurance claims, workers’ them individually. Establish
compensation injuries and trend factors an annual communication
• Improved productivity and absenteeism rates campaign to message the
• Enhanced employee satisfaction, engagement and incentives, the overall success of
personal lives the program and the impact on
the company. But most of all, make the
The big disparity exists not in the results employers communication fun, interesting, and relevant. Engage
want, but in the results they get. There are three common your marketing team to help devise a theme for your
denominators that surface time after time as core elements overall wellness program and use the creative and
in a successful, goal-achieving wellness program. tactical methods you would use in an external marketing
Leadership campaign to generate an internal buzz.
When surveying our clients, one of the most Once the organization has received commitment
common themes amongst successful wellness programs from senior leadership, established the philosophy of
was buy-in and communication from senior leadership the program and developed a powerful communication
within the organization. Employees are more apt to approach, all that remains is to define success.
participate and get involved if the leadership team Wellness programs are a long term commitment by an
leads by example. Take the opportunity to promote organization, and sometimes don’t impact the bottom
the program through letters from the CEO, e-mail line immediately. However, it’s important to set both
campaigns from other leaders in the organization and short and long term goals. Early expectations can be
most importantly, involvement from the senior leaders. set in terms of employee participation or satisfaction
2009
with programs. While later goals can focus on improved
Corporate Culture health assessment scores, reduced claims costs, or
Tying in the culture and philosophy of the increased productivity.
organization with the development of the wellness Committing to corporate wellness has brought
program creates greater participation. The philosophy proven measurable results to many organizations. And
of ‘one size fits all’ will not work when structuring employing some simple strategies can turn a wellness
your program. You need to answer questions such as: initiative into a success.
What is the overall culture of our organization? What
programs have we rolled out in the past that have been
successful and which ones have failed? What is going to
drive them to get involved? This is a great opportunity At Assurance, we have built our reputation on
to get employee input by organizing a focus group or earning our client’s trust and confidence through
wellness committee to assess these types of questions. excellence in every interaction. Independent since
our inception in 1961, Assurance is ranked by
Communication Business Insurance magazine as the 66th largest
Communication is often the missing component broker of U.S. business.
when it comes to implementing and executing a
For further information, please contact an Assurance representative at 847.463.7877
or staffing@assuranceagency.com.
Assurance Agency, Ltd. • One Century Centre • 1750 East Golf Road • Schaumburg, Illinois 60173
phone 847.797.5700 • fax 847.440.9130 • www.assuranceagency.com