Directors and Officers Insurance
Directors & Officers insurance or D&O coverage is a type of liability policy that protects the directors and officers of a company typically from negligence, bad faith, and breach of fiduciary duty. The directors are typically nominated and approved by the board and officers include Chief Executive Officer, President, and other corporate officers.
There are a variety of litigious situations that may occur when operating a cannabis business. They include regulatory challenges, federal illegality, employment practices, investors, and other issues governing a legal entity. The board of directors have a responsibility to the company to be certain they act in good faith and involved with decisions that are in the best interest of the company.
Despite having protection from a legal entity, a director or officer may still be held personally liable depending on the circumstances of the legal action involved by that individual.
Historically, D&O policies have been offered by a very limited number of insurance carriers to the cannabis industry. The reason stems from perceived risk by the insurance carriers because of federal preemption.
The insurance is offered on a claims made basis starting with limits of $1,000,000. Claims made is a type of policy that must be active in order for a claim to potentially be paid. The recognition and purchase of retroactive date is important when purchasing new insurance in order to cover the prior period of time.
Typically, the annual premium for D&O Insurance starts at $7,500 per year depending on your annual revenue along with underwriting factors.
Sample D&O Coverages