Insurance in the Financial Industry – What All Firms Need to Know

June 2nd, 2021 · 2 min read

Insurance is not always an area that many want to concentrate on, but if you have had a claim, you understand how important insurance is. Breach of fiduciary duty, failure to disclose, and execution errors are all common losses (claims). These losses and the attorney fees associated with their defense can be severe, and risk transfer becomes crucial.

Errors & Omissions (E&O) insurance is a type of professional liability insurance that firms can purchase to protect themselves and their employees against losses stemming from alleged negligent acts, errors, omissions, or breaches of duty by the firm or its employees, while performing investment advisory services.

These policies often cover costs related to litigation, settlements, judgements, and formal regulatory investigations. Coverage extends up to the amount specified by the insurance contract, in excess of the deductible. Coverage can be endorsed to cover sales of Life and Health products. Pricing is based on your size, compliance, loss history and management’s expertise.

Similar to Errors & Omissions insurance, Directors & Officers (D&O) insurance is optional, and protects firms against losses related to alleged misconduct or negligence. However, D&O insurance is focused on actions taken by officers and directors in the management of the firm. D&O coverage is often included as part of a BD firm’s E&O policy form. When it is not already covered in this way, firms can typically purchase D&O coverage as an additional component on E&O policies.

Insured persons, as well as the organization, are generally covered for liability to third parties (investors, regulatory authorities, and other potential litigants) that arises out of their activities while serving in their official capacities. Coverage also applies to an insured person’s spouse, domestic partner, and other beneficiaries in the event that a suit is continued against these individuals after the insured person’s death or incapacity. Triggers for D&O coverage include the filing of civil or criminal judicial proceedings, arbitration or mediation proceedings, administrative or regulatory investigations or proceedings, and written demands for monetary or non-monetary relief.

Are you covered? If not, request a consultation with Starkweather & Shepley to protect your business against losses.

About Starkweather & Shepley One of the nation’s top insurance agencies, Starkweather & Shepley was founded in 1879 in Providence, RI, insuring cargo calling on ports around the world. In 1935, the agency created an ownership trust, where every employee shares in the firm’s success and sees a direct link between its growth and their benefit. Starkweather & Shepley offers a full range of cost-effective commercial insurance and risk management solutions. From promising start-ups to established enterprises, businesses depend on Starkweather & Shepley commercial insurance to protect them from loss.