Recent FisherBroyles client alerts have focused on many of the threats facing U.S. companies, their officers and executives. We’ve discussed cyberattacks and data security breaches, the heavy monetary penalties that can ensue from violations of the False Claims Act, Stark Law and Anti-Kickback statute, and even the criminal penalties that can land a CEO in federal prison. All are proof that American companies are operating in an atmosphere where threats abound - from hackers stealing protected corporate and personal information, to internal whistleblowers who stand to gain substantial monetary rewards for reporting violations of federal and state laws, to government investigations that can result in enormous financial penalties and, in some cases, criminal charges.
Companies must recognize the minefield in which they operate and plan accordingly. A vital component in protecting any company, its officers, and executives from the many threats facing them is obtaining appropriate coverage under a director’s and officer’s liability (D&O) insurance policy.
D&O policies can be extremely complex, and are often customized from client to client. Depending upon your company’s industry and the nature of its day-to-day operations, a D&O policy may need to cover the gamut of potential liabilities from data breaches due to cyberattacks, to the loss of HIPAA protected patient information, and the violation of any number of federal laws including the Foreign Corrupt Practices Act, securities laws, the False Claims Act, Stark Law, Anti-Kickback statute, and many others. No company should just assume that these, or any other risks, are covered under a general D&O policy without a close examination of the policy’s terms and exclusions. We have found through many years of counseling clients that a great number have no idea if they are covered under their D&O policy for the costs of a cyberattack, the legal defense of an FCA claim, or the penalties that may accrue against both a company and individual wrongdoers for the violation of any number of federal and state laws.