Enterprise Risk Management, 2nd Edition

CHAPTER 35Commercial and D&O Insurance for Large Corporations: Best Practices in Protecting the Assets and Liabilities of Directors and Officers and Their Organizations

 

STEPHEN J. MALLORY, ICD.D, FCIP, CRM, BA

Risk and Insurance Industry Executive, Experienced Board Member, Instructor of Risk Management

 

INTRODUCTION

This chapter addresses the process of overseeing adequate insurance protection for a large organization and for its directors and officers. It is written primarily for directors and executives of sizeable organizations who spend in the hundreds of thousands and/or millions annually on insurance, although the principles are applicable to any sized organization. Management can use this chapter to ensure that proper processes are in place to protect the organization with adequate insurance. Boards can use this chapter as a benchmarking guide when certain insurance scenarios arise that require oversight, and is ideally suited for a risk committee's usage as they undertake oversight of all risk-related matters. For large organizations that are sophisticated insurance buyers, the quality of coverage (versus price as a driver) is a necessity. Also important for large organizations is the need to buy high limits of insurance to protect against catastrophic losses (like train accidents, product liability, or directors and officers liability) that could bankrupt the company and its directors. Mistakes made in not securing quality of coverage, or in not buying enough limits, ...