Limiting D&O Exposure Protection from Discriminatory Lawsuits

It’s important for cooperative corporations to have enough insurance to cover any unexpected problems that may arise, and one of the most crucial policies in any corporation’s insurance portfolio is directors and officers insurance, more commonly known as “D&O.” While a general insurance policy protects damage to property, D&O insurance is designed to protect individual board members from having to pay out-of-pocket for damages awarded in lawsuits against the board.

“D&O insurance is there to provide protection for members of the board, appointed committee members and those acting on behalf of the board for their actions—or inaction, as the case may be,” says Patrick Clair of SKCG Group Inc., an insurance agency in White Plains.

“It’s a policy designed to cover the legal defense and indemnification of claims made against a building corporation, the board of directors and the individuals who serve on the board for monetary damages,” says Arthur Schwartz, vice president at Masters Coverage Corp., a Manhattan insurance broker.

James A. Fenniman, EVP of Manhattan-based Bollinger Insurance, puts it succinctly: “D&O protects the officers and directors from lawsuits. That’s an issue that comes up quite often in some of the co-op and condo buildings in New York.”

According to Douglas Heller, an attorney with the Manhattan-based law firm of Friedman Krauss & Zlotolow, exactly what is covered by a board’s D&O policy depends a great deal upon the policy—most policies cover what’s known as “wrongful acts,” but even that can be a subjective term. Regardless, he says being informed—and knowing your coverage—is key.

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2 Comments

  • can members of a board of directors use monies from the corporation general fund to pay for legall defense cost when being sued by a shareholder for wrongful acts?
  • can members of a board of directors use monies from the corporation general fund to pay for legall defense cost when being sued by a shareholder for wrongful acts?