Executive Liability Insurance – Why Private Companies Need It

Since its inception about fifty years ago, D&O insurance has evolved into a family of products responding differently to the needs of publicly traded companies, privately held businesses and not-for-profit entities and their respective board members, officers and trustees.Directors’ & Officers’ Liability, Executive Liability or Management Liability insurance are essentially interchangeable terms. However, insuring agreements, definitions, exclusions and coverage options vary materially depending upon the type of policyholder being insured and the insurer underwriting the risk. Executive Liability insurance, once considered a necessity solely for publicly traded companies, particularly due to their exposure to shareholder litigation, has become recognized as an essential part of a risk transfer program for privately held companies and not-for-profit organizations.Optimization of protection is a common goal shared by all types of organizations. In our opinion, the best way to achieve that objective is through engagement of highly experienced insurance, legal and financial advisors who work collaboratively with management to continually assess and treat these specialized enterprise risk exposures.Private Company D&O ExposuresIn 2005, Chubb Insurance Group, one of the largest underwriters of D&O insurance, conducted a survey of the D&O insurance purchasing trends of 450 private companies. A significant percentage of respondents gave the following reasons for not purchasing D&O insurance:
• did not see the need for D&O insurance,
• their D&O liability risk was low,
• thought D&O risk is covered under other liability policiesThe companies responding as non-purchasers of D&O insurance experienced at least one D&O claim in the five years preceding the survey. Results showed that private companies with 250 or more employees, were the subject of D&O litigation during the preceding five years and 20% of companies with 25 to 49 employees, experienced a D&O claim.The survey revealed 43% of D&O litigation was brought by customers, 29% from regulatory agencies, and 11% from non-publicly traded equity securities holders. The average loss reported by the private companies was $380,000. Companies with D&O insurance experienced an average loss of $129,000. Companies without D&O insurance experienced an average loss of $480,000.Some Common Examples of Private Company D&O Claims• Major shareholder led buy-outs of minority shareholders alleging misrepresentations of the company’s fair market value
• purchaser of a company or its assets alleging misrepresentation
• sale of company assets to entities controlled by the majority shareholder
• creditors’ committee or bankruptcy trustee claims
• private equity investors and lenders’ claims
• vendors alleging misrepresentation in connection with an extension of credit
• consumer protection and privacy claimsPrivate Company D&O Policy ConsiderationsExecutive Liability insurance policies for privately held companies typically provide a combination or package of coverage that includes, but may not be limited to: Directors’ & Officers’ Liability, Employment Practices Liability, ERISA Fiduciary Liability and Commercial Crime/ Fidelity insurance.D&O policies, whether underwritten on a stand-alone basis or in the form of a combination-type policy form, are underwritten on a “claims-made” basis. This means the claim must be made against the Insured and reported to the insurer during the same effective policy period, or under a specified Extended (claims) Reporting Period following the policy’s expiration. This is a completely different coverage trigger from other liability policies such as Commercial General Liability that are traditionally underwritten with an “occurrence” trigger, which implicates the insurance policy that was in effect at the time of the accident, even if the claim is not reported until years later.”Side A” coverage, which protects individual Insureds in the event the Insured entity is unable to indemnify individuals, is a standard agreement contained within many private company policy forms. These policies are generally structured with a shared policy limit among the various insuring agreements resulting in a more affordable insurance product tailored to small and mid-sized enterprises. For an additional premium, separate policy limits may be purchased for one or more of each distinct insuring agreement affording a more customized insurance package.Also, policies should be evaluated to determine whether they extend coverage for covered “wrongful acts” committed by non-officers or directors, such as employees, independent contractors, leased, and part-time employees.Imputation of Knowledge & SeverabilityCoverage can be materially affected if an Insured individual has knowledge of facts or circumstances or was involved in wrongful conduct that gave rise to the claim, prior to the effective date of policy under which the claim was reported. Policies differ as to whether and to what extent, the knowledge or conduct of one “bad actor” may be imputed to “innocent “individual Insureds and / or to the Insured entity.”Severability”, is an important provision in D&O policies that is often overlooked by policyholders until it threatens to void coverage during a serious pending claim. The severability clause can be drafted with varying degrees of flexibility– from “partial” to “full severability.” A “full severability” provision is always most preferable from an Insured’s standpoint. Many D&O policies, impute the knowledge of certain policy-specified senior level officer positions to the Insured entity. That imputation of knowledge can operate to void coverage that might have otherwise been available to the Insured entity.M&A and “Tail Coverage” ConsiderationsThe “claims-made” coverage trigger is critically important in an M&A context where contingent liability risks are inherent. In these contexts, it’s important to evaluate the seller’s policies’ options to purchase a “tail” or “extended reporting period” for each of the target company’s policies containing a “claims-made” trigger.A “tail” coverage option allows for the reporting of claims alleging “wrongful acts” that occurred during the expired policy period, yet were not actually asserted against the Insured until after the policy’s expiration, but instead were asserted during the “extended reporting” or “tail” period. An acquiring company’s insurance professional should work closely with legal counsel’s due diligence team to identify and present alternatives to manage contingent exposures.What a Director or Officer Doesn’t Know Will Hurt ThemDirectors’ & Officers’ Liability insurance policies were originally created solely to protect the personal assets of the individuals serving on public company boards and executive officers. In 1992, one of the most prominent D&O insurers led a major transformational change in D&O underwriting by expanding coverage to include certain claims against the insured entity. Entity coverage for publicly traded companies is typically restricted to securities claims, while privately held companies and not-for-profit organizations benefit from more comprehensive entity coverage because they lack the public securities risk exposure of publicly traded companies.The “Claims- Made” Coverage TriggerD&O policies are universally underwritten on a ‘claims-made’ basis. This translates to an unequivocal contractual requirement that the policyholder report claims made against an Insured to the insurer during the effective policy period. The only exception is in the case where an optional reporting ‘tail’ is purchased which affords the Insured the ability to report claims during a specified “extended reporting period,” as long as the wrongful act occurred during the effective period of the immediately preceding policy.DefenseD&O policies issued to public companies generally contain no explicit duty to defend and some require the Insured to select from a pre-approved panel of pre-qualified defense counsel. In contrast, many private company D&O policies do contain a provision placing the defense obligation squarely upon the insurer, and still other policies contain options allowing the defense to be tendered by the Insured to the insurer within a specific period of time. Some D&O policies contain defense cost provisions that require an allocation or sharing of the defense costs between the Insured and Insurer, based upon a determination of covered versus non-covered allegations.Settlement HammerD&O policies typically contain a “settlement hammer” provision. This clause operates to limit an insurer’s obligation to indemnify in the event the Insured refuses to consent to a settlement that is acceptable to the insurer. Some policies may express the amount the insurer will pay for covered loss under this circumstance as a percentage of the ultimate covered settlement or judgment. Other D&O policies may limit their economic exposure to the amount for which the case could have historically settled, but for the Insured’s refusal.Regulatory Proceedings and InvestigationsMost D&O insurance policies afford qualified protection against “regulatory and governmental” investigations, “administrative or regulatory proceedings,” and criminal proceedings. Policies often require the proceedings to be directed against a natural person Insured, to be commenced and maintained in a manner specified in the policy, such as a ‘formal’ order of investigation, and only for policy-defined defense expenses incurred after the issuance of a formal order or an indictment.D&O policies’ definitions and other corresponding provisions and exclusions vary, and should be carefully evaluated to determine whether they encompass informal investigations from the time a subpoena is received, or from the time an Insured person is identified in writing as a person against whom charges may be filed.Learning the A,B,C’s and D’s of D&O CoverageThe three main Insuring Agreements found in public company D&O policies, are typically referenced as “Side A, B, and C coverage”. They are sometime supplemented with an optional Coverage D.”Side A “Coverage – Individual Insured Coverage”Side A Coverage,” also known as the “Non-Indemnifiable Loss Insuring Agreement,” provides coverage to individual officers and directors against claims for their policy-defined wrongful acts in their official capacities, under fairly rare circumstances in which the Insured entity either cannot or will not provided indemnification.The policy’s “Side A” coverage for non-indemnifiable claims against directors and officers, almost universally provides that no retention is required to be paid by individual Insureds. A separate “Side A” limit may be available in addition to the traditional D&O policy’s aggregate limit of liability. “Side A” excess D&O policies have become more commonplace in the past several years, and certain “Side A” excess policies may also offer “difference in conditions” (‘DIC’) coverage that generally provides a feature of ‘dropping down’ to respond to claims either not paid by the primary or underlying D&O policy insurer, or in the event indemnification is unavailable from the Insured entity, the underlying limits are eroded by covered claims against the entity, or the underlying D&O insurers deny coverage to the directors. Some Side A policies are underwritten as non-rescindable by the insurer. Purchasers of this coverage should also consider, if available, an option for reinstatement of policy limits for the outside directors, in the event of premature policy limit exhaustion.”Side B” Coverage – Corporate Reimbursement Coverage
This insuring agreement reimburses the Insured entity for covered loss under claim circumstances where the corporation is indemnifying its directors and officers. This provision does not afford any coverage to the Insured entity for its own potential liability, and is subject to a self-insured retention (“SIR”) that must be paid by the Insured entity before an Insurer will make any payments. It’s important to note that many Insureds do not realize they are contractually obligated to obtain the insurer’s prior consent to incur costs and expenses, and only those costs and expenses approved in advance by the insurer will be deemed to have satisfied the Insured entity’s SIR obligation. It’s important for policyholders to understand they run a serious risk of losing some or all of their otherwise available coverage, if they incur legal expenses prior to reporting the claim, or if they enter into negotiations or reach a settlement agreement in principle without the insurer’s prior knowledge and consent.”Side C” Coverage – Entity CoverageThis insuring agreement affords coverage to the publicly traded Insured entity only for it own liability and is typically restricted to coverage for securities-related claims. “Securities Claims” is a policy-defined term, encompassing only claims arising from the Insured entity’s own securities. Privately held companies and organizations are afforded substantively different coverage under this insuring agreement.”Side D” Coverage – Outside Entity Insured Person CoverageThis insuring clause is available as an option on most D&O policies. It provides coverage to designated “Insured Persons”, for their liability as a result of their membership on an “Outside Entity” board. This coverage applies on a “double excess” basis, meaning it is triggered after the exhaustion of any indemnification provided by the Outside Entity to the Outside Entity director, as well as any insurance coverage available from the Outside Entity. Traditional D&O policies typically extend automatic coverage to insured Individuals who are designated by the policyholder to participate as a board member of a not-for-profit organization.Some Additional Considerations
In addition to the topics highlighted earlier, D&O insurance purchasers should gain familiarity with how their policies may respond under bankruptcy situations, potential coverage issues arising from a Special Committee’s investigative activity, potential issues involving priority of payments among Insureds, hidden D&O insurance program design flaws that can render excess D&O policies unresponsive to catastrophic claims, and the changing requirements of international D&O coverage to remain compliant with local country regulations. These topics will be covered in a future article.This article provides general information and is neither intended to provide any legal advice nor to provide any advice with regard to the specific interpretation or operation of any insurance policy. Any insurance policy’s applicability is highly fact specific. Qualified legal counsel should be consulted regarding laws that may apply with respect to policy coverage interpretation in the state in which the policy will be interpreted.

What Is Network Marketing? The Future Of Network Marketing!

In one of the previous articles I wrote about the history of network marketing which offers a great explanation regarding where the model of network marketing comes from. Yet the whole game changed the last couple of years. And the cause of that is: THE INTERNET.This article “What Is Network Marketing? The Future Of Network Marketing” will concentrate on the evolution from traditional network marketing into online network marketing and the future of network marketing.No 1 Marketing Principle: Target Your ProspectsWhat people that are engaged in network marketing or have been before remember, is that the distributor that contacted them asked them to make a list of their network: relatives, friends and other individuals they might know. The next action was to make contact with all these people to become part of your team or to consume the product.If we look at this tactic from a marketing point of view it is really silly. The most essential factor in marketing is “targeting your prospects”. Hence who are the individuals you are trying to find when you look for business partners? Is it truly Uncle John who is 70 years old?? What I would like to clarify is that you have to focus on entrepreneurs! Sadly not every person has them in their direct network.Are there more fish in a little pond than in the Ocean?The question above leads to our second aspect on the subject of prospecting. In order to get in touch with your prospects you either have to meet them in person or call them. This indicates you are required to travel or spend money on phone bills, especially long distance calls. Therefore the region people worked in with traditional network marketing is rather small, equivalent to a little pond. The odds that you will locate the fish you are seeking are smaller when you look in the little pond. But how possibly will you make contact with the fish in the ocean?Time is your most precious asset!As stated above, with traditional network marketing you have got to get together with your prospects in person or call them. This is not an automated system so you will spend time on it. Given that you have to spend your own time day after day into an assignment, it reduces the potential of the task because you have just 24 hours in a day. I particularly consider that Freedom is the number 1 motive why folks start a network marketing business.Turn out to be the teacher: that is the key to success!Training is truly important in network marketing. A distributor gets compensated to deliver his wisdom and skills to the distributors in his network. Training your network implies spending time as well (Individual training, seminars, etc.).Technology brings Freedom backTaking a glance at the number of people that made a fortune with traditional network marketing strategies we have to realize that these tactics worked. But now that we have the Internet on hand, the new generation of network marketers is capable to change the whole game.There is no better way to target prospects then the Internet. There are never-ending methods of setting up a marketing campaign (Pay per click, Forum marketing, Blogging, social networking). Rather numerous alternatives do not even cost a dime. This permits you to target your prospects and let them approach you rather than you pursuing your prospects.Approximately 2 billion persons are using the Internet and are one click away from the information you desire to share with them. This is the ocean we talked about previously. Through the right campaigns you will be capable of building an never-ending stream of good targeted prospects.Internet together with other on hand technologies allows you to build an automated system that runs by itself. Hence it does not make a difference any longer if you get 10 prospects or 400 prospects a day. This is also the case for training your network. It is rather uncomplicated to set up a platform with training videos, webinars, video tutorials, etc. The largest part of this information you just have to build once and your network can gain access to via your training platform 24/7.As you can notice the Internet and technology will assist you build your business faster and bigger and grants you with more freedom in the same time.I would like to call attention to one more important thing. The fact that technology and the Internet makes things easier and give rise to bigger opportunities, does not signify that this is a get-rich-quick deal. The rules of the network marketing game changed entirely and to facilitate making your online network marketing business work, you have to ensure that you understand how to play this game. It is significant to have your strategies in place and master the essential skill sets. And if you do you will be able to create ultimate Freedom.

Home Based Internet Marketing Business – 6 Best Internet Marketing Strategies to Your Success

For internet entrepreneurs, there are many internet marketing strategies to increase sales and maximize profits online. You will discover and learn the best internet marketing strategies in this article. With those strategies, you will boost skyrocket your profits and grow rapidly your home based internet marketing business.Strategy #1: Research Everything You Need to Know Effectively. It is obvious that research hot niche keywords to attract more traffic, maximize the benefit of your pay per click (or PPC) campaigns, and find new hot niche markets with high demand are required in this strategy. Of course, this is the first important strategies you must do for your own home based internet marketing business. With those well-researches, you will understand everything you must know for your markets, particularly needs and want in the market. There are many resources on the internet to help you to discover hot niche markets and keywords. The highest recommendation for discovering those markets and keywords is to use both of Overture and WordTracker keyword search tools to generate a massive list of keywords. With the list, you can analyse and evaluate the market, competitors and keywords.The first key success of home based internet marketing business is to discover niche keywords with low competitors. With those keywords, you can: (1) Set up your high quality content website with high quality and tightly targeted traffic (2) Improve your ranking in search engines (3) Build your unique & high quality content/articles with keyword-rich (4) Create your profitable pay-per-click campaign and (5) Build up profitable successful blog online.Strategy #2: Approach the Front-Back Sell through Great Sale Letter.Second of the best internet marketing strategies you must concern is to provide a great and easy to understand sale letter on your website. This internet marketing strategy is all about writing a great sale letter with high conversion rate and builds your online mailing lists. The sale letter on your website is the first place for visitors to walk through your products, services, testimonial, bonuses and your required action. You should state all required information for what they are looking. You should definite clearly what you want visitors to do in your website. For example, you might want them to order your products, you want them to subscribe your mailing lists or you want them to download your bonuses. The highest recommendation in this strategy is to focus on how to convert those visitors to buyers through your own sales letter. You will not earn any dollars if you can not convert those visitors into your buyers. Also, you are losing your time to drive traffic to your website if you can not convert into sales. Remember, the more conversion rate you have, the more sales you get!Apart from trying to sell your products through sales letter, it is obvious that you should capture visitors’ information in order to sell your products or other products to them after they leave. Without capturing the information, you are losing the opportunities to earn money in the future.The real keys to your success in this strategy are: to create a powerful sales letter with high conversion rate and sell products in the future. With capturing the visitors’ information, the opportunities to make money in the future are opened.Strategy #3: Do Not Reinvent the Wheel. The core concept of this strategy is that you do not reinvent the wheel all the time. You must utilize the full use of others’ expertise to maximize the opportunities to make serious money online from home based internet marketing business. There are many websites, expertise and other successful entrepreneurs on the internet. You can ask them to minimize your mistakes and grow your home based internet marketing business. The highly recommendation is to join other membership sites and utilise the others’ expertise as much as possible. The more you learn, the more you know! With others’ support, you will minimize your mistakes and can grow your business easier.The real keys to your success in this strategy are: (1) to research effectively from others and (2) utilise those others’ expertise to minimize your mistakes and maximize your profits. Many studies reveal that those truly successful internet entrepreneurs are willing to help people who are serious and passionate with the internet marketing and success.Strategy #4: Automate Your Home Based Internet Marketing Business.Without the automation internet marketing strategy, not only you would get fewer sales, you simply would not have more time to research ideas for new home based internet marketing businesses. By building home based internet marketing business that is fully automated. You can withdraw from your daily business as usual works and you will have more time to look for more untapped niche markets and other opportunities. Many studies show that this strategy is the best of the best internet marketing strategies to grow your home based internet marketing business in the long term. The rules of thumb, 80/20 rule, for your business are: (1) put 80% of your effort and time for your day-to-day operation tasks and (2) put another 20% for growing your business.The real keys to your success in this strategy are: to find automated tools to help you and automate your online business. With those tools, you will have more time to think and grow your business. Otherwise, you will live in the daily business as usual works.Strategy #5: Set up Your Own Affiliate Program.There is no doubt that affiliate marketing business is a win-win relationship business between merchants and affiliate entrepreneurs. If you have your own products or even profitable products, it is a great idea to boost your sales through the affiliate marketing business. You will pay the affiliate commission to those affiliate marketing entrepreneurs when they gain sales for you. All you have to do is to support and follow up with those affiliate marketers in order to maximize your profits online. With those super affiliate marketing entrepreneurs, your sales will be increased rapidly and consistency.The real keys to your success in this step are: to build a great relationship with affiliate entrepreneurs and support them as much as possible. Their sales are your sales too.Strategy #6: Improve Yourself Consistency.The last best internet marketing strategies for your home based internet marketing strategy is you. You are the most important and valuable asset in your business. You have to improve yourself all the time. Learning everything you need to know for your business is a must. Also, you should not give up too quickly if you can not earn big money in the short term. Truly entrepreneurs are always looking forward to the long term success. The online internet marketing business is a real business. With this sense, you have to treat it as real business.The real keys to your success are to improve yourself, the best valuable asset in your business, and to build consistency your online internet marketing business always.Final thoughts, the best internet marketing strategies for your highly successful in home based internet marketing business are: well effective researches, front-back sell, smart utilization, automate effectively, and self-improvement consistency. With these things, there is no doubt that you will success in the home based internet marketing business.