Patrick Stroth returns to M&A Talk to discuss the ins and outs of directors and officers insurance – also known as D&O insurance – and why it is a standard component of a transaction for buyers of middle-market businesses. Patrick highlights how the D&O tail can work along with reps and warranties insurance and tips on how to make it fairly painless for a seller to get D&O insurance even if they have never had this type of insurance before. This must-know topic applies to sellers now or planning to sell in the future.
“The purpose of a D&O insurance policy is to protect owners and founders from legal actions brought against them for decisions they make in the course of running their business.”
Patrick Stroth
What You’ll Learn
Details and Differences: Hear how this insurance differs from general liability insurance, the circumstances when it might be used, and how it affects a Board of Directors.
Components of D&O Insurance: Learn about naked insurance, the tail, side-A insurance, and much more about what can and can’t be covered by a D&O policy.
Misconceptions: Overcome the common misperception that D&O coverage is not needed for a company that doesn’t have a Board and is not publicly traded, and learn how this can cost a seller time and money when they are trying to close their sale.
Function of D&O Insurance: Get details on how this insurance supplements reps & warranties insurance with the overlap or additional coverage that occurs with both types of insurance.
When, Why, and How To Get a D&O Policy: Learn what’s needed in order to apply for a D&O insurance policy, why a million-dollar policy is probably not enough, and details on what falls under the coverage of a policy.
“Getting a D&O insurance policy, or getting the right insurance in general, is just good corporate and risk hygiene that is going to better position a company and enhance its value.”
Patrick Stroth
Topics Covered
What exactly is D&O insurance, who needs it, and how is it different from general liability? [2:20]
What role does this type of insurance play when selling a company? [8:03]
Why is reps & warranty insurance not enough by itself? [12:08]
How does the cost compare between a reps & warranty policy and D&O insurance? [15:24]
What events does this insurance cover? Is it only for events that happen pre-closing? [21:44]
What categories might claims fall under? [25:08]
What is the application process to apply for a D&O insurance policy? [31:17]
Why should an owner get a D&O policy if they are not actively selling their business? [37:54]
National Practice Leader – Mergers & Acquisitions at Liberty Company Insurance Broker | Silicon Valley, CA
As National Practice Leader for Mergers & Acquisitions for Liberty Company Insurance Brokers, Patrick and his team deliver the broadest array of transactional liability coverage solutions to the middle and lower middle market. These programs range from RWI – both Buy and Sell side, Seller Fraud, Naked D&O Tail, Tax Liability, Environmental Liability, and Secondary transactions.
You’ve invested your blood, sweat, and tears into an enterprise that has provided for you, your family and your employees. The moment has finally come for you to start a new chapter in your life. Explore your options now.
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