The media coverage of the GameStop Corp (GME) stock trading fiasco grabbed the attention of Wall Street, the public, regulators, and politicians alike! GameStop is a video game retailer whose stores can be seen in shopping and strip malls. What happened to GME may morph into new investor strategies, a new way of uniting litigants, new regulations and increased executive risks for companies and their leaders!
For those that missed it, some are calling it “Wall Street vs Main Street!” There are a dozen pending lawsuits filed against Robinhood Markets, Inc., an online brokerage firm, by investors (i.e. customers) who were denied the ability to trade certain stocks. Individual investors teamed up on Robinhood and other investment websites to push up the GameStop stock price to negatively affect hedge funds who were betting on the stock price to go down i.e. “shorting” the stock!
Small business owners (and their employees) form the backbone of this country. The pandemic has been tough on small businesses and now there are a host of other risks that small businesses should be concerned about and strongly consider transferring these risks to an insurance company.
Recently a client of mine (he is retired and the former CEO of a major company that makes toothpaste and other household goods) told me that he turned down a lucrative offer of $250,000/year to sit on the board of another large and well-known firm. He said, “There is no way I can take that risk for a company that does not have Board of Directors’ insurance” (AKA Directors) and Officers liability insurance. This was an eye opener for me as I was just asked to sit on the board of a local Chamber of Commerce.
Let’s face it, times are tough, and we are in a litigious society where people are suing companies and individuals for a variety of reasons. Whether or not the allegations are true, defending lawsuits take time and money. Your business reputation can take a hit, win, or lose.
The bottom line is, a Board Member can be personally sued for a company’s mistake if that company does NOT have an employee handbook or Directors and Officers (D&O) insurance!
I reached out to our D&O expert, Ken Jones, from Coastal Risk Management on this matter, and he said, “This is happening more and more. The Cyber Security and D&O markets are very tough right now as there have been a tremendous amount of losses, and the payouts are nuclear in size! Expect the markets to tighten.”
I took it a step further and looked at the Chubb Insurance company’s current D&O application for companies with up to 250 employees. Their Directors and Officers policy lists the following coverage options:
The application asks specifically, does the applicant (business owner) have written procedures in place regarding:
What does this all mean to me, you might be asking?
As an employee, you should be asking for either an employee hardcopy handbook or PDF file to review your rights, coverages, protections, and company procedures in place “just in case” something happens.
As a business owner whether small or large, you should be checking to see if you have policies such as “errors and omissions,” “directors and officers,” and cyber security policies. For companies with less than 25 employees, these policies can be inexpensive. The real question is, can you afford NOT to have policies for these risks in place?
To get a quote or policy review from our expert, reply “quote D&O” to [email protected] and we will get right on it!
Be Positive, Test Negative and KEEP THE FAITH!