Minding the P’s & Q’s of Your D&O Insurance

For centuries, the origin of “Mind your P’s & Q’s” and its exact meaning have been debated.

People in the publishing business say the origin lies in the typesetting days. The lowercase letters p and q were difficult to tell apart in the leadtype pieces that printers used to build words, sentences, and paragraphs.

Some say it served as a reminder for children to remember their “please” and “thank-yous” when venturing out in public.

Regardless of which definition you subscribe to, the meaning of “be ready, be prepared” and “take care” are generally accepted. The adage holds true with any individual who is considering accepting a position as a board member. The board member must be prepared for the fiduciary responsibility and the personal liability that they assume by taking on the role.

According to Jeanne Flanagan, director of management liability at M3 Insurance, a board member should take care to understand more than just their fiduciary responsibility. “It is important that board members inquire about the insurance coverages that are in place to protect their personal assets against claims made against them in their board position,” Jeanne said. Because leadership can be held personally accountable for claims, the only liability coverage that provides protection for that exposure is Directors and Officers Liability Insurance. This coverage is the financial backstop used to provide protection to the directors and officers when indemnification by the corporation is not available.

The coverage essentially has three sides:

  • “Side A” Protects the directors and officers when the organization is unable to indemnify those leaders for acts on behalf of the organization;
  • “Side B” – Reimburses the corporation when it is able to indemnify the directors and officers for their activities; and
  • “Side C” – Solely protects the corporation for wrongful acts attributed to the organization, not the directors and officers.

The bottom line is that D&O insurance is designed to protect the personal assets of the directors and officers of a company. The coverage is complex with many nuances to how the D&O coverage is constructed, and no two policies are the same.

Directors and officers must realize that, with D&O lawsuits on the rise, risks are inherent in leadership. For those individuals considering a board position – remember to mind your P’s & Q’s and ask about protection for the D’s & O’s.

All organizations – whether private, public or non-profit – can be exposed to claims of financial injury from its stakeholders. All can benefit from this type of coverage. To learn more about you D&O insurance coverage options, contact your M3 Account Executive.

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This blog post contains excerpts of an article by Jen Pino Gallagher, originally published in the October 2019 of The Cheese Reporter. M3’s Food & Agribusiness professionals are regular contributors to the Cheese Reporter. Read the full article as well as other recent M3 articles on cheesereporter.com.

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