Regardless of the size of your business, if your company has a body of directors and officers supporting it, you may want to consider a Directors and Officers Liability (D&O) insurance for many reasons. A D&O insurance is a liability insurance that is payable to the directors and officers of your company or even to the organization itself as a form of reimbursement for losses or cost of defense costs in the event of such a loss due to a legal action. D&O Liability insurance protects your company in case of legal actions resulting of allegations of a wrongful act. D&O insurance policies usually concentrate a lot of the coverage on the defense costs.
Your directors and/or officers might face allegations and claim of exposures of all kinds. The following includes some examples to keep in mind:
- Allegation of wrongful acts such as conflict of interests, breach of contract, torts, and violation of statute
- Allegation of financial mismanagement including wasting of assets or extension of credit where not warranted
- Allegation of mistakes/errors in judgment such as false reports and misleading information
- Allegation of negligence including failure to examine documents, failure to detect embezzlement of funds or failure to file an annual report
The above includes only some examples of many scenarios that could create exposure to your organization. A D&O Liability Insurance policy secures coverage for your directors and officers allowing them to focus on their fiduciary duties to your organization.