Wednesday, June 30, 2010

Summer 2010

The loss of a key employee can be a major blow to any business if that person is the primary contact for customers and suppliers, or if he or she fills important management roles of the business. Loss of the key person may also decrease efficiencies in running the business and result in a loss of capital.

Losses caused by the death of a key employee are insurable through coverage called key employee life.  Here are a few things you should know about this coverage:
  • Key employee life pays a death benefit to the company if the key employee dies.
  • The policies are normally owned by the company; thus the company pays the premiums and is the beneficiary. 
  • Key employee life policies will compensate the business against covered losses that result from that person’s death or disability.
  • The amount and cost of insurance needed for a particular business depends on the situation as well as the age, health, and role of the key employee.
If you are interested in this coverage for your company, please contact us for a consultation.

Employee Benefits Update:

Directors and officers liability insurance (D&O) can protect directors and officers of a firm from liability due to negligent acts, omissions, or misleading statements that result in lawsuits against the company.  This coverage is an effective tool in helping mitigate liabilities for an organization as well as protecting the personal assets of the directors and officers. 

What you should know about D&O coverage:
  • Coverage for directors and officers is only for non-bodily injury claims.  This includes claims of financial loss resulting from mismanagement.
  • D&O coverage typically excludes intentional dishonest acts as well as property damage claims.
  • D&O policies may be broadened to include coverage for employment practices liability.
  • There are no “standard” D&O policies.  Many versions are available, thus it is essential to review the policy wordings and endorsements with professional advisors, including legal counsel, to ensure the coverage you are acquiring is suitable for your needs.

There are a variety of D&O coverages available, 
including the following:

Corporate reimbursement coverage indemnifies directors and officers of an organization for claims resulting from their acts on behalf of the organization.  The corporate charter or by-laws usually state the obligation for the corporate organization to indemnify its directors and officers.  In some cases it is mandated by state statute.

Side-A coverage provides D&O coverage for personal liability when directors and officers are not indemnified by the firm. This coverage is needed when the corporation is either financially unable to indemnify its directors and officers or when it is prohibited from doing so.

Entity coverage is designed to cover the organization directly in addition to its directors and officers.