Why arts organizations need Directors & Officers Liability Insurance
Board members of arts organizations are held, at an unprecedented level, to be personally responsible for the actions and decisions they take on behalf of the organization – putting their personal assets at risk if these decisions are tested in court. Mark Boon, CEO at specialist insurance broker La Playa highlights the importance of Directors and Officers Liability insurance.
“Trustees of arts organizations are putting their necks on the line if the management team makes a bad decision. And with financial pressures causing challenging debates with the unions, every move is a potential lawsuit. It’s crucial that arts organizations put the right Directors & Officers Liability Insurance in place” says Mark Boon, CEO, La Playa.
Independent directors contribute enormously to arts organizations – bigger picture visioning, connections, funding resource and so on, so it’s critical that you don’t leave them high and dry when the worst happens. What if…
Legally, the directors of a company and the company itself are separate entities – and each entity may end up being defendants, separately or jointly, in any legal action or prosecution. They need proper protection – and the liability coverage that comes with their homeowners insurance will not respond to these types of lawsuits.
Board members’ legal liabilities include:
* Company and trust law: trustees are liable to their charity for any breach of trust or fiduciary obligations.
* Civil law: trustees are liable to third parties either for breaches of contract or for infringement of another’s rights. Copyright issues and privacy breaches are white-hot issues at the moment.
* Criminal law: trustees have different liabilities depending on the state.
In some cases, they may even be liable for actions they have omitted to take. And actions can come from many different sources such as creditors, customers, suppliers, employees (tribunals), shareholders, fellow directors, liquidators and receivers, and regulators.
What is Directors & Officers Liability Insurance? Directors & Officers Liability Insurance (D&O) is now considered a crucial form of protection for all companies, and is often a requirement before board members even risk their personal assets to serve your organization.
It provides protection for directors and senior managers against risk exposures by covering the legal costs to defend the individuals and to pay the settlement or judgment ultimately awarded to the plaintiff. It can also cover expenses incurred by aninsured person who faces formal investigation by a government body into their affairs or the affairs of their organization.
Trustees of the board, directors, corporate officers, and the entity and employees defined within the bylaws as having control of operations.
The risks are real and tangible. Look after your board – because they’re worth it.
There have been several notable plagiarism lawsuits impacting the film and music industry in the last several years, but Disney Studios is facing multiple plagiarism lawsuits, coming from a variety of sources that are seeking $250 million in damages.
The first of the lawsuits was filed by singer Jaime Ciero, and involves the song sung by millions of little girls worldwide. Ciero is suing Disney, along with singers Idina Menzel and Demi Lovato, claiming that the top song from the 2013 blockbuster Frozen is based on his song Volar. Pointing to similarities in note combinations, melodies, themes, and more that he sees between his original and Disney’s hit, he is seeking $250 million in damages. In his suit, Ciero claims that his song was “a huge international success reaching millions of listeners and landing on numerous charts of the most popular, top-performing songs.” A quick check on YouTube reveals that the video of his song has been seen just shy of 15,000 times, while the Frozen video has been viewed 1,249,399,612 times. The Disney song Let It Go was written by the song-writing team of Kristen Anderson-Lopez and her husband Robert. Robert Lopez is one of only 12 people to have ever won an Emmy, Grammy, Oscar and Tony.
The suit filed by Ciero is not the first that Disney has faced. In 2015, U.S. District Court Judge William Martini dismissed another $250 million plagiarism lawsuit filed by author Isabella Tanikumi, who claimed that the movie’s story is not based on Hans Christian Anderson’s The Snow Queen, but instead is a plagiarized version of her self-published autobiography titled Yearnings of the Heart. Tanikumi offered 18 examples that she claimed proved that the story characters and tone of her work were stolen by Disney. The judge dismissed the case, indicating that the stories were “entirely different” and that the similarities were “tenuous at best.” Another author, Kuwaiti Muneefa Abdulah, claimed that the film represented plagiarism of her 2007 story, “The Snow Princess.”
Film Production companies can find themselves exposed to allegations of plagiarism, unauthorized use of ideas, characters, plots and more; other claims may cite unfair competition or breach of contract. Though many of these cases are simply dismissed, others progress to an eventual jury trial or settlement out of court that requires payment to the plaintiffs. Film Errors and Omissions Insurance protects producers from these risks and more, covering the costs of investigation, settlements and defense. It can give financial protection against mistakes and allegations including:
La Playa’s experienced brokers can provide you with the guidance and information you need to make sure you have the right level of coverage at the right premium. Contact us today to learn more.
No matter how comprehensive your coverage is or how service-oriented your claims adjuster, there are certain steps that you can take to optimize your insurance claim experience. By paying attention to the tips below, you’re likely to maximize the insurance coverage you receive, as well as receive your payment faster.
Do not delay when filing a claim. The sooner you contact us about a claim, the sooner we will be able to begin investigating the situation and processing it. This is particularly important for claims that will require extensive investigation, so even if you simply suspect that you will be the subject of a lawsuit, it’s a good idea to contact us.
Make sure that you have all of your evidence in order. Documentation is at the heart of every claim, and is what provides you with the greatest chance of fair compensation. Assemble all pertinent records, whether that is photographic, correspondence, handbooks and documents, or receipts. Situations involving potential witness testimony require collecting all contact information for follow up. The more comprehensive the details you provide, the better.
Be mindful of what you say. Whether you have a friendly conversation with an interested third party or a high-spirited argument with an adversary, exercise extreme caution when discussing anything about a claim. Offhand remarks can come back to bite you, whether in the form of witness testimony or in breaching the terms of your insurance policy. Leave all conversations regarding settlement, liability, or any other related discussions to your claims adjuster.
Remember to rely on your insurer. Your insurance company is always there to provide you with guidance and the answers to questions, and it’s important that you take advantage of that availability. Faced with a challenging situation, taking action based on your gut reaction or what seems to make the most sense may lead to greater liability. Whether a situation is merely concerning or seems truly emergent, it is better to call and ask how to proceed then to learn later that the unilateral decision you made was the wrong one.
Understanding your coverage is also critically important. Insurance can cover so many of a business’ potential liabilities that organizations may assume that they have paid for coverage that they haven’t. They are often uncertain as to the specific coverage that they’ve paid for, only to find out that they do not have the protection that they need. Review your policy frequently, and especially as circumstances within your organization change. Our experienced experts can make sure that you have the coverage you need, and will stand by your side when you need to file a claim.
La Playa offers affordable insurance protection in cyber space for arts organizations. But why do you need Cyber Liability Insurance? Most arts organizations would agree that data or information is one of their most important assets – it’s almost certainly worth many times more than the physical equipment that it’s stored upon. But the risks are not just about data:
1. Your data is an important asset – but it’s not covered by standard property insurance policies.
Your data is probably worth much more to you than the physical equipment it’s stored on. Many arts organizations don’t realize a standard property policy wouldn’t respond in the event that this data is damaged or destroyed. La Playa’s Cyber Liability Insurance portfolio policy can provide comprehensive cover for data restoration and rectification in the event of a loss – no matter how it was caused, and up to the full policy limits.
2. Systems are critical to your day to day work – but downtime isn’t covered by standard business interruption insurance. Most arts organizations rely on systems to conduct their core business, from marketing to electronic box office. But traditional business interruption insurance doesn’t cover hack attacks, viruses or malicious employee interference. Our Cyber Portfolio policy provides cover for loss of income associated with a computer virus or denial of service attack.
3. Cyber crime is the fastest growing crime in the world, but most attacks aren’t covered by standard property or crime insurance policies. New crimes are emerging every day. The internet means that your organization is now exposed to the world’s criminals and is vulnerable to attack at any time of the day or night. Phishing scams, identity theft, and telephone hacking are all crimes that traditional insurance doesn’t address. Cyber Liability Insurance provides comprehensive crime cover for a wide range of electronic perils that are increasingly threatening the financial resources of arts organizations.
4. Third party data is valuable – you can be held liable if you lose it.
We all hold more data than ever before, and often this data belongs to audiences, donors and suppliers. Contracts and agreements contain clauses around data security that can leave you liable for expensive damages claims in the event of a data breach. Increasingly, consumers are also seeking legal redress in the event that an organization loses their data. This risk is even greater if you hold data on US consumers.
5. You could face severe penalties if you lose credit card data
Global credit card crime is costing billions, and increasingly this risk is being transferred to the organizations that lose the data. Under merchant service agreements, organizations can be held liable for forensic investigation costs, credit card reissuance costs and the actual fraud conducted on stolen cards. These losses can run into hundreds of thousands of dollars for even a small organization. Cyber insurance can help protect against all of these costs.
6. Complying with breach notification laws costs time and money
GDPR brought with it a raft of new regulation around breach notification, with 72 hour deadlines and hefty fines for non-compliance. These generally require that if you lose sensitive personal data, you provide written notification to the individuals potentially affected. Customers who have had their data compromised expect openness and transparency from the organizations they entrust it with. Cyber Liability Insurance provides cover for the costs associated with providing a breach notice.
7. Your reputation is your number one asset, so why not insure it?
Any arts organization lives and dies by its reputation. Although there are certain reputational risks that can’t be insured, you can insure your reputation in the event of a security breach. When your systems have been compromised, you run a risk of losing the trust of your loyal customers – which can harm your business far more than the immediate financial loss. Our Cyber Portfolio policy will not only help to pay for the costs of engaging a PR firm to restore this for you, but also will reimburse you any loss of current or future income.
8. Social media claims are on the rise
Social media is the fastest growing entertainment channel in the world. Information is exchanged at lightning speed and exposed to the world. But often you have little control over what’s said and how it’s presented – you could be liable for the actions of your employees on sites such as LinkedIn, Twitter and Facebook. Cyber Portfolio will cover your costs arising from leaked information, defamatory statements or copyright infringement.
9. Portable devices bring new data risks
Portable devices and remote/home working mean that important and confidential data can be stolen or lost much more easily. A laptop left on a train, an iPad stolen in a restaurant, or a USB stick going missing are all good examples. In addition, the devices themselves are being targeted with a growing number of viruses being built just for them. Cyber Liability Insurance will cover the costs associated with a data breach following a loss, theft or virus attack on a portable device.
10. Hackers don’t just go after big business – you’re at risk too
Whilst the high-profile hack attacks often involve big companies, small organizations are also at risk and often don’t have the financial resources to get back on track after a hacking attack or other kind of data loss. In fact, over a third of global targeted attacks are aimed at businesses with fewer than 250 employees. Cyber attacks are quickly becoming one of the greatest risks faced by smaller companies, making Cyber Liability insurance a must. It can help protect against the potentially crippling financial effects of a privacy breach or data loss.
A UK arts venue had malicious coding inserted into their files from an outside virus attack with the aim of infecting every visitor to their website – despite having suitable firewalls in place. On discovery, the website had to be closed down, a temporary site built – and months later, a permanent one. The costs of the investigation, the temporary and permanent new websites amounted to around £12k. With no Cyber Insurance in place, this was a significant hit to the venue’s finances.