Insurance for Banks
Insurance that protects management
As the broker placing the largest number of management liability and related coverages on behalf of banks in the greater New England area, The Spofford Group is uniquely qualified to assist banks with a host of challenges faced today. The challenges include litigation arising from increased regulatory scrutiny, foreclosure, and online banking.
Additional concerns include, but is not limited to:
- Cyber security/phishing
- Wrongful acts committed by directors and officers
- Failure to perform professional services
- Employment allegations
- Dishonest acts by bank employees
- Breach of fiduciary duties
- Lack of borrower’s insurance on mortgaged property
Furthermore, banks are not static. Exposures change quickly, especially on the technological front, and too often banks find their coverage might not have kept pace with their changing exposures or with available coverage. The Spofford Group will work with you to determine the optimal coverage for your bank. Topics such as electronic transfer of funds, network and information security, regulatory exposures, and professional services performed will be discussed with you, so we can analyze potential exposures and craft coverages that address your bank’s unique requirements. Scope of coverage can vary widely from policy to policy, so it’s important that you obtain expert advice concerning your specific circumstances. In general, we recommend that banks include the following coverages:
Directors and Officers (D&O) Liability Insurance is liability insurance payable to the directors and officers of a company, or to the organization(s) itself, as indemnification (reimbursement) for losses or advancement of defense costs in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers. Such coverage can extend to defense costs arising out of criminal and regulatory investigations/trials as well. It has become closely associated with broader management liability insurance, which covers liabilities of the corporation itself as well as the personal liabilities for the directors and officers of the corporation.
Side A Directors and Officers (D&O) Liability Insurance that provides only “direct” coverage of the directors and officers but does not cover the corporation’s legal obligation to indemnify the directors and officers (known as Side B or corporate reimbursement coverage). Side A-only forms are written either on an excess or umbrella basis over a primary Directors & Officers policy. When written on an excess basis, they provide additional limits if a claim exhausts the coverage available under the primary form. When written on an umbrella basis, Side A-only policies afford broader coverage than the underlying, primary Directors & Officers policy, as well as additional limits.
Bankers Professional Liability Insurance provides coverage to the Company, Directors, Officers and Employees for actual or alleged wrongful acts in performing or failing to perform “Professional Services” as defined in the policy on behalf of a customer that is performed for a fee and through a written contract. The scope of coverage can vary widely from policy to policy. Coverage also includes lender liability.
Employment Practices Liability Insurance coverage for employment practice allegations made against the insured organization and insured persons. The policy includes, but is not limited to, coverage for claims of discrimination, sexual harassment, hostile work environment, wrongful termination and employment-related issues.
The Bankers Blanket Bond, also called the Financial Institution Bond, protects financial institutions against loss from dishonest acts of employees, burglary, robbery or theft (both on the premises and in transit), forgery, counterfeiting, misplacement, check kiting, electronic funds transfer as well as a number of other perils particular to the financial sector. Some underwriters extend coverage to include kidnap/ransom coverage. If Kidnap/Ransom extortion coverage is not part of the bond, it can be purchased separately.
Fiduciary Liability covers trustees, employers, fiduciaries, professional administrators, and the plan itself with respect to Errors and Omissions (E&O) in the administration of employee benefit programs as imposed by the Employee Retirement Income Security Act (ERISA).
The Employee Retirement Income Security Act of 1974 (ERISA) was enacted to protect employee benefit plans against loss by acts of fraud or dishonesty. The statute instituted a fidelity bond requirement for plan trustees, and it defined the coverage limit requirements.
Cyber Liability covers first and third party risks associated with e-business, the Internet, networks and informational assets. Coverage can include, but is not limited to, privacy issues, the infringement of intellectual property, business interruption, cyber ransom, transmission and coverage for breach response.
Mortgage Impairment Insurance protects the bank’s interest in property mortgages. If unbeknownst to the lender, the borrower does not purchase insurance and/or if the insurance is inadequate, the coverage protects the bank’s interest in the property.
Foreclosed and Force Placed Coverage is required once a bank discovers that a mortgaged property is not insured by the mortgagee, coverage must be “placed” in force by the bank. Bank Mortgage Impairment policies typically allow ninety days to place alternate coverage from the time it is discovered that an insurance policy has lapsed. Foreclosed property coverage covers property the bank has foreclosed on. The amount of coverage is usually the amount of the outstanding loan.
Corporate Account Takeover Protection covers wire fraud perpetrated through the client’s computer system which is a growing phenomenon. Banks can provide their clients with protection by purchasing Corporate Account Takeover Protection. The protection provides bank clients with up to $250,000 for wire fraud transfer, anti-malware software and online education, so that customers can be informed on best security practices.
Environmental Liability protects lenders, contractors and property owners who are at risk for claims arising from regulatory violations and other issues, such as subcontractor error, property damage, pollution and other environmental concerns not covered by general liability policies.
Representations and Warranties protects when complex transactions, such as mergers and acquisitions, carry risks for both parties involved in the transaction. The Spofford Group can help structure insurance coverage to mitigate and fund uncertainties created by purchase and sale transactions.
Claims Advocacy can sometimes be a complex process which is why our dedicated claims management personnel work closely with our clients to successfully navigate the claims handling process with them. Claims advocacy includes: consulting with clients on best practices for early identification and reporting of covered matters, to claims submission on our clients’ behalf and analysis of carriers’ coverage positions through structuring of settlement agreements and oversight of expense reimbursement and claims payments. Our goal is to identify responsive coverage provisions and be instructive as to potential hurdles and consequences in the course of a claim’s adjudication.
To discuss your Bank’s specific needs, please call (781) 740-8990 or contact us here.