Russell Bond & Co., Inc. September 2017  
Private Companies Need Management Liability
 
Many owners of private companies think they don't need Management Liability.  But privately held organizations are just as susceptible to lawsuits as publicly held companies.  A properly placed Management Liability insurance policy can protect companies, their executive officers, board members and employees against demands for monetary damages made by third parties, but also for defense costs, which often can exceed the cost of settlements.

A great benefit of Management Liability is that it often picks up coverage for the unforeseen or unpredictable lawsuit that may be waged against an organization.  Companies can anticipate the threat of fire or wind but they can't anticipate the costs associated with a Management Liability suit, nor the impact on the company!

The following categories represent the most common situations where Management Liability claims brought against a company.

Shareholder LawsuitsShareholder lawsuits comprise one of the largest categories of lawsuits brought private company directors & officers.  Allegations include actions of majority shareholders that benefited them, but at the expense of minority shareholders, and inadequate or inaccurate disclosure in private placement materials.
Management Liability
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Creditor / Bankruptcy Trustee Actions:  Private companies facing financial difficulty may have to cope with the added challenges of creditors either questioning the accuracy of financial information originally provided or suing for breach of fiduciary duty.  Should the company file bankruptcy, bankruptcy trustees also may sue to recoup losses from directors.

Competitor Lawsuits:  These can include allegations of anti-trust or unfair competition, misrepresentation of a competitor's products or infringement of a competitor's trade dress. 

Customer Lawsuits:  These include those stemming from contractual disputes, debt collection, the costs or quality of products or services, refusal to extend credit and discrimination.


Both the likelihood of experiencing a claim and the potential consequences of an event are often underestimated by owners, directors and senior executives of privately held companies.  Considering changes in technology, shifting demographics, increased regulations, unstable economic factors and changing social and cultural norms, it's not surprising that businesses in general are at a greater risk for lawsuits and litigation - either from the public, employees, suppliers, government regulators and law enforcement agencies.
 
Tonya Hollederer Joanna Brancaleoni Ed Chadwick Jackie Oddo
Tonya Hollederer, ext. 133
Team Leader
thollederer@RussellBond.com

 
Joanna Brancaleoni, ext. 121
jbrancaleoni@RussellBond.com
Ed Chadwick, ext. 261
echadwick@RussellBond.com
Jackie Oddo, ext. 161
joddo@RussellBond.com
 Call us at  800-333-7226
 
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