When is the last time you checked your Directors and Officers (D&O) policy?
Chances are high that you either don’t have D&O coverage in place, or if you do, it’s a scaled back version. While you may be relying on your discrimination policy within your EPLI coverage for similar protections, today’s litigious environment requires that dealers put a strong D&O policy in place to protect their executives.
Let us explain.
In the past, D&O policies mattered little for auto dealers. This may influence why, even today, two of the three major direct dealer underwriters still have yet to offer a D&O policy as part of their package.
However, with the growing complexity of the dealership business model, increased consolidations and acquisitions and employee-initiated lawsuits, dealers can no longer avoid considering purchasing D&O protection.
You likely need D&O if you’re a:
- LLC or corporation with two or three operators,
- Multi-site owner,
- Single-family owned dealership who may transfer your business to the next generation,
- Dealership buyer (or seller), or
- Serving on a local board for another company or non-profit.
You may not think of yourself as a board, but you are in fact, operating as a board. If you find yourself in a legal battle without D&O, your personal financial assets could be on the line due to your fiduciary relationship.
If you’re considering selling your dealership or looking to purchase a dealership, you want D&O to cover you in the unfortunate case that pre-sale due diligence fails for either party. For example, if you purchase a dealership and six months later discover that the seller provided you inaccurate information, such as inflated sales or lower expenses, and you don’t have D&O, you have no insurance to represent you legally. Conversely, if you’re the seller, you have no insurance-provided defense should you be sued.
The Single or Multi-Site Owner:
We’ve seen cases where dealers make an operational decision, say in regard to their benefits plan or profit sharing, and are sued for supposed negligence—profiting the company at the sake of the employees’ best interest. The owner and their board are only covered and protected with a D&O policy.
Once I have D&O, What Do I Get?
- Defense coverage for those areas where you may have gaps not covered by another policy
- Built-in support network (that means you won’t have to hunt down an attorney, negotiate rates or go it alone)
- Some D&O polices can even be negotiated where you retain your preferred legal representation.
We applaud business leaders—and that includes automobile dealer owners—who work tirelessly day in and day out to do their best by their companies and their employees. Still, we recognize legal situations arise and being able to protect yourself and the business is a high priority. Dealers can no longer go without the proper D&O coverage.
Other Policy Structure Issues
Relying on a policy package may cause more issues than just insufficient D&O protection. A claim on one line of coverage can often increase premiums for multiple policies, pushing your costs up unnecessarily. Learn more here about why this happens and what other options are available to you.
Check Out Our Auto Dealers Center for More Insights