Despite the frequency and impact of these events, many private companies have not purchased D&O insurance to help manage their risks. Why? Because non-buyers mistakenly believe the coverage is unnecessary, either because they are privately held or family run.
This belief stems from the misconception that most suits or fines are brought by shareholders, which is commonly the case in the more highly publicized suits brought against public companies. But for private companies, suits from customers, vendors/suppliers and other third parties most prevalently lead to losses. Even more alarming, when a non-buyer does experience a D&O loss, the average cost is nearly $400,000 — a sum that can have a serious and potentially devastating impact on an organization’s balance sheet.