Emerging liability triggers include:

Bankruptcy: Between Jan. 1 and Sept. 30 of this year alone, more than 3,600 U.S. companies have filed for bankruptcy or issued warnings, according to The Deal LLC. That is an increase of almost 20 percent over the same time period in 2010. With bankruptcies on the rise, companies are more likely to either file for bankruptcy themselves or be impacted by bankrupt partners. Agents need to help their clients understand the liabilities associated with bankruptcy. If a company loses its line of credit and as a result, is unable to provide services to clients, it will not have the funds to stay afloat or pay its creditors. Not only will the company be exposed to lawsuits from clients they can no longer service, litigation from creditors could also be brought.
Unfair Competition and Deceptive Trade Practices: As competition grows more fierce across industries, more companies may find themselves involved in litigation—for example, as related to patents. There is a growing trend of companies investigating competitors' patents that might be out of date or filed incorrectly. Any private company that is operating with a patent (or pending patent) could be the target of a lawsuit from competitors, if competitors learn that a company is misrepresenting itself or misusing a patent it may not own.
Talent: Unemployment statistics may be bleak, but top talent remains in high demand. In the past, a company might turn its cheek if an employee was hired by a competitor, but today the scenario is often different. Agents and brokers need to make clients aware that former employers are increasingly filing suits against companies for unfair competition, deceptive trade practices and interference with economic advantage when the new employee retains clients, forms or data.

Private companies need to understand the reality of their D&O liabilities—not only that litigation or claims are possible, but that the fallout of the economy may mean the threat is growing. Agents can play a pivotal role in educating clients about their risks and providing solutions to help manage them by taking the guesswork out of whether D&O liability coverage is truly necessary. When company and personal assets are on the line, the answer should be clear.

Special Reports /

D&O Liability Coverage for Private Firms: A Case of Nice, or Necessary?

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