SVB Insurance Implications – Examples of a Directors and Officers claim

We may not have avoided an economic crash when the Fed saved uninsured depositors of the SVB bank.  But they did help insurance companies avoid paying out on Directors and Officers liability claims according to AM Best.

Directors and Officers liability protects employees, directors, and offices for “wrongful acts” in the management of their organization.  The most common claims have to do with the mismanagement of company funds.

Here are some examples I give when I’m talking to a church or human service organization:

1. What if you decide to leave the denomination?
2. What if someone gave you $75,000 for a new playground, and you used it to buy a couple of buses instead?
3. What if the leadership decides that the preschool that has served the community for decades should now only serve the local community?
4. What if you decide to merge with another organization, and their stakeholders are unhappy with the merger?

Back to SVB, what happens when a business loses $1,000,000 because the bank they deposit money with goes out of business?  What happens when that start-up business goes out of business because they no longer have the operating capital they need to make payroll?

Did the CEO choose the business?  Or did the venture capitalist?

Whose great idea was it to put $1,000,000 in a bag and put it on the Titanic?

A lot of businesses would have gone under.  A lot of investments would have disappeared.  People would have lawyered up and looked for someone to blame.

Insurance companies would have been paying for a lot of lawyers.