Everyone, from my youngest son Matthew to oldest corporate CEO knows that our actions have direct consequences, many of which can be unexpected and unwanted. Yet not everyone knows about or is informed about Director and Officer Insurance. I certainly don’t come home to my son asking me “Daddy, did you sell any D&O insurance today?”, yet there is an implied trust between my son and I, that I will help him when facing the consequences of his decisions. Likewise, every business entity has individuals managing; each of whom pose liability threats for their decisions and non-decisions, this is where D&O coverage is able to protect your business.

All of us know people who take on the responsibility of guiding a business. Sometimes it is your own business or a company in which you are employed or perhaps you might be following your passions serving a non-profit group. You might even be helping a friend who needs your expertise. And larger privately and publicly owned companies will often recruit outsiders to serve on the Board of Directors to help manage the company.

Yet in so many of these cases those serving the business do not fully comprehend the responsibility and liability they take on. Did you know that your personal assets are up for grabs because of decisions you make or fail to make? Are you comfortable with this fact? Is your business, yourself, or your employees protected from the whims of our sue-happy country?

If you don’t know or are unsure then you should be asking about D&O Coverage.

Take a look in the papers and you will see officers and directors being sued or facing criminal charges for conduct inappropriate to their positions. Hewlett- Packard is probably the most visible recent example of corporate misgovernance and bad decision-making. Bart M. Schwartz, a former federal prosecutor and now adviser to H.P., recently commented that it was ethics, not the law, which needed to be paid more heed.

In the case of a suit against the governance of your company there is the chance that the business will be required to indemnify the individual. Indemnification means the company will reimburse the individual for expenses incurred and amounts paid in defending claims brought against the individual for actions taken on behalf of the company.

While this is some level of protection to the individual indemnification still poses a risk to the company. Can the business afford the legal bills? Do the individual’s alleged activities fall under the indemnification provisions? Can the individual afford to pay the bills and then wait to see if they are going to be indemnified?

Falling under the umbrella of Management Liability insurance, D&O Insurance can cover matters that are not indemnified by the company, it can pay when the business is financially unable to indemnify, and it can reimburse the business when it indemnifies the individual.

Management Liability policies have many variations. Aligning the policy language, limits, and deductibles with the goals of both the individuals and the organization requires a solid line of communication between the insurance broker and company management.

A partial list of topics frequently includes:

1. In order to recruit quality outside directors what insurance protection will need to be in place?
2. Will prior acts be covered?
3. How do we find coverage for claims brought between the insured?
4. Is it better to have a “duty to defend” policy?
5. Do we cover only officer positions identified in the Bylaws?
6. Should the company be protected for claims falling under this policy?
7. How much coverage and what size retention (deductible) should we take?
8. If we buy the extended reporting form, how much will it cost?
9. What is the financial strength of the insurer?
10. Do we exclude certain alleged actions and either self-insure or buy separate coverage?
11. Should we buy a multi-year policy?

Finally, D&O Insurance can benefit public and private businesses of any size. Deciding if it should be a part of your risk management budget and what it should provide is part of the job we enjoy doing at Riviera Insurance Services.

About the Author:

Christopher Hill is President of Riviera Insurance Services. For 25 years Chris has served publicly-owned, privately-owned, and non-profit business in the area of insurance and risk management. He can be reached at chill@rivierains.com

Q & A with Sandy Krueger by Steven Woodward

SW: Would you share a little about yourself with us?

SK: I was born and lived the first 23 years of my life in the suburbs of Minneapolis until I moved to Santa Barbara. While living in Minneapolis, I spent a lot of time either water skiing or snow skiing. I also attended 2 years at the University of Minneapolis. After those two years and some time off I moved to Santa Barbara where I attended SBCC and began taking a series of insurance courses.

SW: What are some of your hobbies?

SK: I’m very family orientated and so I’ve become involved with studying my family’s genealogy. My cousins and I have enjoyed finding new family members and visiting places our family has been. Every chance I get I am venturing off to a cemetery or town record’s office to follow the trail. Sounds kind of strange but the history of my family is as important to me as the people in it. And, of course, I also enjoy getting together with my friends (The Ladies) for evenings out and weekend gatherings.

SW: Tell us a bit about your family.

SK: Well, I have been married to my husband Jay for 23 years and we have two boys; Erik is 22, and Chris, a senior at San Marcos, is 17.

How I became married is not your traditional love story. Indeed, the marriage began with a demand and a bet. After having dated Jay for six years I told him that if he was interested in marrying me, he had better have a bottle of champagne with him when he proposed. I don’t think he believed me when I said this. His first attempt was during a very romantic getaway in Yosemite. After a beautiful hike into the wilderness, Jay asked for my hand in marriage. Unfortunately, for him, he had forgotten to bring champagne on the trip. I told him, “Maybe next year”. The following year we were off on another wonderful camping trip. This time Jay was ready to go and had brought the champagne. This time I was very ill and advised by a doctor to go home and rest. Jay said, “Maybe next year!” After that incident a bet was thrown out; if Jay quit smoking I would have to marry him, but he still had to present the champagne with the proposal. Four months later after he quit, I completed my end of the bargain. And yes, we shared another bottle of the bubbly.

SW: As a mother of two grown boys what advice would you give to parents raising kids today?

SK: Stay involved with their lives as much as you can. For our sons, Jay and I would always be involved as a coach or team mom. Kids grow up too fast and before you know it, they are gone; so being at all those games, practices, and recitals is well worth it. And raising teenagers is tough. I listened to a parenting tape that said if you did your job between 0-12 years, everything will turn out fine. Being a proud and attentive parent of your children is the key to having teenagers and young adults you can be proud of. It is also vital to have a well rounded view of the world as it helps in making the right decisions. We are very proud of our two boys and I feel that the time we all spend together has paid off.

SW: Alright, let us get back to business, how did you get started in insurance?

SK: In 1977, after moving to Santa Barbara, I decided to give a career in insurance a go. I soon learned how much I can help people through my career choice. The very first policy I wrote had to file a claim. The house burned down in the Sycamore Canyon Fire of July 1977; however the policy protected the family and gave them a chance to rebuild their lives and their home. Being a part of that helped me to understand that I was on the right career path; it was an amazing feeling to know that I had helped rebuild this family’s home and given them hope after such a disaster. Eventually I moved from Personal Lines to Commercial Lines insurance, which has given me a chance to help local business owners in the same ways I used to help individuals. I am grateful to have learned from and worked with Chris Hill, a man whom I call a friend & a teammate to this day. Our working relationship is now into its 24th year and I am happy to have been included in his new team.

SW: Why Insurance?

SK: I love to work with people! I also view the career as an enjoyable challenge. The complexity of the insurance world means that I have a full time job finding solutions and solving problems for people. Being able to offer a service like we do and to simplify and help business is what has kept me at it these 29 years.

SW: If I were searching for an agency, what makes you unique?

SK: It is the experience level each member of the Riviera Insurance team brings to the table. We represent a “team” concept that enables clients to trust us with all of their insurance needs and to know the entire company. We bring the personal touch that so much of the industry has lost and you’ll certainly know more than just one of us. We are not a large insurance agency looking to do business with everyone. We have a small group of bright people with the right attitude and we enjoy working with companies that want to know their agents. Everyone here is someone who is interested in working with people and we like to see that trait in our customers. Simply bringing a quote to a client is not our style; we enjoy creating a relationship with them as well.

SW: And finally, what is the best word to describe you?

SK: Enthusiastic! I love life!