For many in the financial industry, community and corporate banking alike have seen their fair share of concerns over the scandals related to the financial crisis dating back to 2008.
Litigation against the directors and officers of the more than 330 financial institutions that have failed since that period is an indication that Financial Institution Insurance is much-needed coverage.
Shareholder claims have been on the rise, due to improprieties, which only adds to the plethora of risks resulting in a difficult environment for independent, locally owned and operated institutions. This makes providing financial stability in many communities increasingly difficult.
Professional liability policies for banks
Professional liability coverage has become increasingly complex in recent years. It’s important for brokers to educate themselves about these coverages as these changes come about. Then they’ll also be able to conduct a thorough review of these policies in conjunction with other coverages a bank must have in place, including property/casualty, general liability, etc. in order to identify any gaps that could possibly leave the door open to potential risks.
Directors & officers (D&O) liability
D&O liability policies provide needed coverage for individuals against impending lawsuits arising from their roles as directors or officers for alleged acts of improper establishment of corporate policy. Banking institutions often provide coverage for directors and officers with respect to employment policy or actions taken with regard to specific employees, shareholder disputes, as well as failure to comply with Securities and Exchange Commission rules and other federal regulations that apply to corporations.
A D&O policy is essential for all banks where citizens often serve on the board of directors. A policy that fails to provide broad coverage will run the risk of not being able to attract and retain leadership, as people will be wary of exposing themselves to personal liability.
It’s important to make sure all directors and officers, whether appointed or elected, are covered under the bank’s D&O policy. In addition, all employees should be covered under an employment practices policy as well. Banks must also consider whether or not independent contractors or temporary workers should be included in their coverage. Speak to your insurer about different types of Financial Institution Insurance required to address your needs.