Directors & Officers (D&O) Coverage
Presented by Justin Yurchenko
Every Board of Director member needs to realize the risks of operating any organization, and how to reduce those risks with appropriate management strategies. Written and implemented risk management procedures can serve as an effective way to monitor and mitigate risk within any organization. However, when these strategies are unsuccessful, the transfer of risk should fall to your insurance policy.
Directors and Officers insurance (D&O) is an important safeguard to any for-profit or nonprofit organization. D&O protects the directors, officers, employees, shareholders (not involved in management) and sometimes even volunteers. Unfortunately, even in today’s litigious environment, only 28% of companies with revenue of less than $100 million have purchased D&O coverage. In most cases, board members do not foresee any possible litigation, which is the main reason for not purchasing coverage. This is a common misconception, as just about any board can be a sued; moreover, claims can come from just about anyone – employees, customers, board members, vendors, creditors and current clients.
At the heart of any D&O policy lies the promise to indemnify the individual directors and officers in the event they are subject to allegations of wrongful conduct within their organizational duties. The primary coverages offered under a D&O policy are as follows:
- Coverage for claims made against the company, its directors, officers, managers, employees and, sometimes, volunteers.
- Employment Practices Liability, which includes allegations such as wrongful termination, discrimination, and harassment.
- Fiduciary Liability coverage
- Employee Dishonesty coverage
- Kidnap & Ransom coverage
Choosing the right carrier and policy limits is often a difficult process. Each carrier has specialized coverage wording and exclusions. It is important to work with an experienced broker who can determine the best available combination of D&O pricing and coverage for your organizational needs.
At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.
PPACA ALERT: Change in Employer Mandate Affects All Employers in 2015
There has just been another PPACA delay to the employer mandate (also known as the “pay or play” mandate) that was slated to begin on January 1, 2015. As you may recall, this was originally effective as of 2014, but postponed last July. The employer mandate is the component of the law that will fine employers for not providing coverage (or not meeting the affordability or minimum value requirements) to their full-time employees (those working 30+ hours per week, on average). Here are the newest delays to be aware of as they affect all employers with at least 50 full-time equivalent employees:
Employers with 50-99 full-time equivalent employees: Delay of the employer mandate until 2016. Therefore, no penalty in 2015 if you don’t offer coverage, however you still must begin reporting details about your insurance coverage to the federal government in 2015.
Be aware, you will need to certify eligibility for this transition relief and meet other requirements, including not reducing your workforce to qualify for transition relief and maintaining previously-offered coverage.
Employers with 100+ full-time equivalent employees: You must offer coverage to at least 70% of your full-time employees (working 30+ hours) in 2015, then to at least 95% in 2016. You will also be required by to report details to the federal government next year.
Other transition relief contained in the proposed regulations were also extended, including the ability to use a short timeframe (at least 6 months) to determine whether an employer is large enough to be subject to the mandate, a delay in the requirement to provide coverage to dependent children to 2016 (as long as the employer is taking steps to arrange for such coverage to begin in 2016), and the permitted use of a short measurement period in 2014 to prepare for 2015.
WHAT DOES ALL OF THIS MEAN TO ME?
Employers still need to analyze their exposure and employee population. If you are under 100 employees, there is more relief for you however you still have compliance and reporting requirements (to be released over the coming months) that must be reviewed and prepared in time for 2015. If you have more than 100 employees, you will need to review your workforce to determine which employees need to be offered coverage in 2015. While you only have to ensure that 70% of that population is offered coverage, you will need to identify them and ensure you are in compliance with nondiscrimination rules as they apply. Even though this delay appears to provide some relief, it still requires a full analysis and review of your workforce and compliance with some mandates in 2015.
REFERENCE MATERIALS:
The final regulations are available here: https://s3.amazonaws.com/public-inspection.federalregister.gov/2014-03082.pdf
An IRS Q&A is available here: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act#Liability
Employee in the News
We are very proud of our own Deborah Corcoran. If you have ever had the pleasure of working with Deb, then you know she strives to exceed expectations!
In her free time during the summer and fall months Deb knits hats and mittens for two charity organizations. This past December she donated 32 sets of them to Caps for Kids and Pathways for Children. Her donations are always a huge hit and loved by the children who receive them.
Caps For Kids is an organization that provides hand made hats, mittens, scarves, and sweaters to Boston children every holiday season. Please click here to read an article featured in the Boston Globe.
Pathways for Children are leaders in early education and work to strengthen the family unit. Please click here to read more about them.