The need for D&O and EPL coverage is skyrocketing. After two years of the pandemic, a huge increase in cybercrime, and the fast pace of digital transformation, today's business leaders face a much greater risk from legal action than ever before. This is true for large and small organizations alike.

The average D&O lawsuit costs over $120,000, and 28% of executives surveyed experienced some form of litigation in the past 24 months.

In a recent study, conducted in partnership with Wakefield Research, Coalition surveyed 1,000 small businesses leaders about executive risks coverage and claims. Coalition has compiled these results into the 2022 Executive Risks Report.

In this report, we reveal and discuss these findings. Using data and examples, we provide context to help illustrate the current risk of D&O and EPL claims, as well as the demand that executives have for this liability coverage. 

This report also introduces Coalition’s comprehensive Executive Risks coverage that can help protect business policyholders — actively and continuously — through monitoring and alerts that reveal emerging and imminent litigation and reputational threats. 

Key highlights from the report

1. The digital economy has amplified corporate risks

Digital threats strike faster and with more severity than traditional hazards. Threat actors can gain control of company social media accounts, causing extensive reputational damage in seconds. Even something as simple as harassment of employees on email is a growing problem.

2. The pandemic has created new legal exposures

57% of the businesses we surveyed were negatively impacted by the pandemic. Quick decisions regarding remote work, reductions in headcount, and enacting health and safety precautions have made executives vulnerable to a wide variety of lawsuits. Thousands of federal fraud investigations into Paycheck Protection Program (PPP) and other loans have been triggered simply by discrepancies in corporate information entered on forms.

"62% of all businesses bought additional insurance coverage as a direct result of COVID." Coalition 2022 Executive Risks Report

Other COVID-related legal exposures include executives' actions and decisions regarding employer-mandated vaccinations and other COVID-19 precautions, alleged price gouging, denial of refunds, inconsistencies in employee sick leave or termination policies, and many others.

3. Financing activities put executives at risk

There are a number of financing-related activities in which corporate officers can be held directly liable, leaving uninsured companies exposed to potentially disastrous losses. One of the most common scenarios is merger and acquisition litigation (such as conflict of interest objections). Currently there is one lawsuit filed for almost every public company merger transaction. 

"55% of small businesses completed at least one merger/acquisition in the past 24 months." Coalition 2022 Executive Risks Report

2021 also heralded the onset of a huge increase in SPAC class actions, filed by shareholders against numerous organizations trying to fast-track their IPOs by forming a special purpose acquisition company (SPAC) to merge with.

4. Employment practices liabilities are rising

Besides employment and COVID related practices, organizations of all sizes are increasingly facing EPL issues stemming from their company’s diversity & inclusion and equity issues, discrimination or harassment or wrongful termination.

"26% of companies with 100 or more employees experienced an EPL claim in the last two years." Coalition 2022 Executive Risks Report

5. Small businesses are not immune to liability

Data and real-world examples in the report illustrate that no business is too small to face costly D&O or EPL cases. Executives at smaller companies may even be found more personally liable than those at larger corporations because they are typically more directly involved in key decisions.

"36% of small  businesses with D&O coverage have experienced a claim in the last two years." Coalition 2022 Executive Risks Report

According to the Small  Business Administration’s Office of Advocacy, every year, 36% to 53% of small businesses are sued — and 43% of small businesses said that they had at least been threatened with a lawsuit.

Coalition's coverage for executive risks 

The report also explains Coalition’s unique approach to comprehensive executive risks coverage. Using near-real-time data, we drastically streamline the process for brokers — from quoting to binding to servicing renewals. We also share our data and provide risk management recommendations through our active risk assessment. Coalition also provides active monitoring for clients’ risk exposures as well as ongoing support.

Nearly a third of small business executives didn’t purchase management liability coverage because they didn’t realize coverage existed. With Coalition, brokers can now help bridge that gap in knowledge and protection.

Help executives understand their risks and protect them 

Download the 2022 Executive Risks Report now.