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Please press the above
button to be directed to the following coverages:
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Employment Practices Liability Ins. (EPLI)
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Non-Profit D&O |
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Misc. Professional
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Underground / Aboveground Storage Tanks (UST / AST) |
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This information is designed to give you a quick overview of the coverage and how it works. Your policy is the contract that specifically and fully describes your coverage. Please feel free to call 805.373.6968 with any questions.
Just because shares are not publicly traded, private company shareholders are not precluded from holding management responsible for their actions in managing the company. This type of litigation can be complex, resulting in substantial legal defense costs. In addition, D&O Liability Insurance usually includes Employment Practices Liability and sometimes Fiduciary Liability. The former involves harassment and discrimination suits, one of the fastest growing areas of litigation today. Specifics about monoline EPLI coverage can be found in the EPLI section.
NOTE: The claims scenarios summarized are offered only as examples. The examples are not intended to establish any standards of care or to serve as legal advice appropriate for any particular factual situations. Coverage depends on the actual facts of each case and the terms, conditions and exclusions of each individual policy.
1. XYZ Corp. is a privately-held family business engaged in the distribution of tools and heavy construction equipment. When XYZ experienced an upswing in profits due to increase in sales, the majority shareholders voted to approve a large compensation package for the CEO, who is the founder of XYZ Corp. Mr. Smith is a 20% shareholder in XYZ Corp. and is a distant cousin of the CEO. Mr. Smith was upset as he felt that the majority shareholders, the three children of the CEO, were benefiting by siphoning off the recent corporate earnings through the high compensation package given to the father leaving Mr. Smith with little reward. Mr. Smith filed a lawsuit against them alleging breach of fiduciary duty and unfair compensation.
Outcome - After incurring $85,000 in defending the lawsuit, the company agreed to pay Mr.Smith $300,000 representing a percentage of the increased profits.
2. Dispute over valuation of shares of Red River, a privately held company, owning several restaurants in California. Mr. Adams is Vice President of Acquisition & Mergers and owns 25% of the shares of Red River. After the restaurant saw a slump in profits, the Board of Directors decided they needed to shake up personnel and terminated several individuals, including Mr. Adams. Red River paid Mr. Tyler for a buy-out of his shares using a current valuation based on the company's declining profits. He filed a lawsuit alleging that this was not a fair valuation of the shares and was in breach of the shareholder agreement.
Outcome - The court found Red River had a right to value Mr. Adam's shares as it did under the terms of the shareholder agreement and found in favor of Red River. However, Red River spent $275,000 in defense costs defending the litigation.
All private companies have D&O exposures.