D&O: What brokers should know about new threat

Coverage becomes increasingly viable amid a host of new vulnerabilities

D&O: What brokers should know about new threat

Insurance News

By Will Koblensky

Digital exposure is an ever increasing threat to all realms of the business world and the heads of corporations are no exception.

Between media pressure on company leadership and technological security vulnerabilities, Directors and Officers (D&O) coverage is becoming more valuable.

Learn more about D&O insurance here.

Brokers should know who is on the board of directors and for what reason in the event a director or officer’s history comes back to haunt them, according to Dario J. Nalli, director of executive lines at Burns & Wilcox’s Professional & Executive Liability Center of Excellence.

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“Everything performed digitally is tracked in this day and age, at work and on social media,” Nalli said. “In the digital realm, there have been a number of cases where cyber liability coverage was not gained and companies have had to pay out of pocket to resolve the multitude of issues associated with a data breach. This can turn into a D&O claim when stakeholders become upset that management did not act in the best interest of the company and they are sued for failing to gain the proper insurance or implementing the best security.

“If executives and board members are not prepared with a D&O policy they will have to pay for legal defense out of their own pocket or the organization’s assets. This becomes much more taxing on smaller, private organizations and non-profits. In addition, many executives join boards for status but fail to check if they have a D&O policy in place for the board’s actions – a critical action often overlooked.”

Nalli explained that because the technology has abetted globalization, digital threats are global too.

“Digital exposures create a much larger attack surface for every organization operating and communicating in our global economy,” he said. “Senior executives walk a fine line between creating a business culture that is geared towards speed of communication and reduced friction points for clients and partners, along with having the necessary cyber security and defense posture regulators that investors demand in today’s threat environment.

“We are increasingly seeing public and private companies that are being targeted by cyber criminals for hacking events. Senior executives and board members of companies that are hacked have a responsibility to make sure proper procedures are in place to handle data and information. For example, if a cyber-attack occurs and the company is extorted for money or the cybercriminal releases critical information… senior leaders will have to respond to media and regulatory agencies on why systems were not up to par and how critical private information was compromised. If the attack was determined the fault of senior leadership due to mismanagement or a directive not to take the proper precautions to prevent the attack, the D&O policy would respond to defend them in legal battles.” 


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