What is it?
Directors & Officers (D&O) Insurance protects all past, present, and future Directors, Officers, board members, trustees, senior managers and executives, and other business leaders if they’re personally sued for any actual or alleged wrongful acts in managing a company. In the event of a claim, D&O Insurance will protect your personal and corporate assets by covering the cost of legal defence fees, witness and court costs, and any settlements on behalf of a business leader.
Program highlights include:
- Coverage for claims of poor governance, failure to act, management errors, misallocation of funds, misrepresentation to shareholders, operational failures, statutory liabilities, regulatory non-compliance, and more;
- Side A Coverage: Personal Asset Protection to reimburse individual Directors and Officers for losses the organization isn’t legally or financially able to cover;
- Side B Coverage: Balance Sheet Protection to reimburse organizations for expenses incurred when defending Directors and Officers;
- Side C Coverage: Entity Protection to protect your firm for any claims related to traded securities;
- Employment Practices Liability (EPL) Insurance: Protects Directors and Officers from claims made against them by staff, such as discrimination, harassment, wrongful termination, failure to hire, and more.
Why do we recommend it?
As the leader of an alternative lending institution, you’re under a harsh spotlight from clients, shareholders, creditors, regulators, and a variety of other key stakeholders. With rising calls for corporate accountability, even a single mistake or lapse in judgement could lead to a lawsuit for tax liability, not setting up a fund or entity up properly, or a financial loss.
And unfortunately, the consequences for Directors and Officers facing allegations of mismanagement are severe, especially those sitting on any boards of mortgage investments (i.e. MIC, LPs, etc.). Both your corporate and personal assets can be at stake—and your company won’t always be able to reimburse your losses. With a comprehensive D&O policy, you can protect yourself and any other business owners, shareholders, investors, and employees from exposure.
Custom D&O Policies for Alternative Mortgage Lenders
ALTERNATIVE MORTGAGE LENDERS D&O INSURANCE:
While D&O Insurance is a critical coverage for all lending institutions, not all policies are created equal. A standard policy won’t protect your firm from some of the most common risks you face as an Alternative Mortgage Lender. In fact, most standard D&O policies exclude claims related to breach of contract, changing the disbursement of dividends, issuing a security and more.
Fortunately, PROLINK has access to a comprehensive Directors & Officers Insurance policy that’s custom-tailored for Alternative Mortgage Lenders. In addition to the standard D&O Insurance coverages, PROLINK’s program will cover your Mortgage Fund, as well as your exposure as a Mortgage Fund Manager, including:
- Breach of duty as a Director or Officer related to the issuance or purchase of securities (i.e. units of the Mortgage Fund);
- Allegations of misleading statements or misrepresentations related to the issuance of dividends;
- Allegations of misrepresentation in the offering memorandum or participation agreements;
- Failure to disclose material facts that could lead to the financial impairment of the Mortgage Fund or Fund Manager;
- Misrepresentation of warranties provided to purchasers during the acquisition of a covered entity.
FUND MANAGEMENT COVERAGE:
As an Alternative Mortgage Lender, you may also 1) be registered as an exempt market dealer (EMD) under your provincial securities commission or 2) provide mortgage fund management services. Unfortunately, EMDs face significant exposure from investors while dealing any securities or investment funds (i.e. poor advice), while Mortgage Fund Managers face a high risk of borrower claims related to lending services, loan services, and non-performing loan services, such as enforcing or disposing of a loan in default and related assets.
However, the regulatory Errors & Omissions coverage required for Mortgage Brokers and/or Mortgage Administrators will not respond to the above types of errors, omissions, or negligence, leaving you and your organization liable for a significant sum out-of-pocket.
For maximum protection, PROLINK also offers a comprehensive Fund Management D&O Insurance policy that’s geared to your specific business operations and the professional services you offer as an Exempt Market Dealer or a Mortgage Fund Manager. Our policy is fully integrated with no coverage gaps and includes Errors & Omissions protection for EMD services, mortgage underwriting services, and mortgage lending services.
Additionally, PROLINK’s Fund Management D&O policy is a cost effective way for Mortgage Lenders to meet regulatory requirements for lender registration by getting two coverages for the price of one. In fact, it’s now mandatory for all Mortgage Lenders in Nova Scotia to carry Errors & Omissions Insurance, which can currently only be obtained through the Fund Management D&O combined policy.