Tag Archives: D&O

D&O Insurance: Important Protection for Important People

The most common misconception about Directors and Officers (D&O) insurance is that this coverage is only a necessity for large, publicly traded companies. Smaller companies with fewer shareholders may think their exposure to these types of claims may be minimal or nonexistent; however, private companies can face “professional liability” claims from several sources: employees, investors, creditors, customers, competitors, and government agencies just to name a few. The cost alone of defending such claims can sometimes be enough to cripple a business, with settlements and payouts being even more financially devastating.

D&O Insurance Defined:

Directors and Officers insurance is a type of liability insurance (payable to the directors and officers of a company or the organization itself), which covers these individuals/companies for claims made against them while serving as an officer of the company or on the board of directors for any alleged wrongful acts in their capacity as directors or officers.

What are some of the top reasons for private companies to carry D&O insurance?

    • Employment Practices Liability. Claims of workplace discrimination, sexual harassment, and wrongful dismissal can happen regardless of a company’s size or stature. These situations can be even more pronounced in smaller companies with a more hands-on management team.
    • Peace of mind when taking on investors. Those investing in a business expect to eventually see a return on their investment. However, if a business ends up failing and investors lose their money, they will look to recover it by way of legal action against top executives.
    • Personal asset protection. Directors and officers of private companies may have a fair bit of their own money and assets invested into their company, which can subsequently get dragged into defense costs, settlements, and judgements if found liable for any wrongful acts while operating in their duties.
    • Legal expenses. Companies can still get drawn into litigation even if claims of alleged wrongful D&O acts are groundless, and the costs to defend such unfounded claims can add up quickly.
    • It is now more affordable than ever. The market for D&O insurance has grown substantially over the past decade, with most insurance providers offering some form of coverage. Depending on the size of your company, D&O insurance premiums may only represent a small additional cost in proportion to the rest of your insurance coverage.

 

Perhaps most importantly, having a sound D&O insurance program in place offers peace of mind to management, allowing them to better focus their efforts on other important areas such as business growth and smooth operations. Getting a quote is easy – speak to one of our commercial insurance experts today about what options make sense for your business.

Advertisements

Do Your Management or Board Responsibilities Place you at Risk?

What is Directors and Officers Liability Coverage?

Directors and Officers Liability Insurance, often called D&O, is liability insurance payable to the directors and officers of a company, or the organization itself, as reimbursement for losses or advancement of defense costs in the event an insured suffers a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers.

What types of lawsuits might D&O coverage include?

If Directors and Officers fail to act properly, they may be liable, depending upon the circumstances, to shareholder, employees, customers, creditors, competitors, regulators and other third parties.

In Canada, Directors can be held personally liable, jointly and severally, for unpaid employee wages, vacation and pay taxes. The liability is imposed without fault, on a strict liability basis, and can include liability for amounts which become outstanding even after a director resigns.

The principal sources of actions and allegations against Directors and Officers are extremely broad and can include:
• Misrepresentation/Failure to Disclose
• Failure to Remit Statutory Obligations
• Breach of Contract
• Breach of Duty
• Shareholder Disputes
• Regulatory Actions
• Actions by Creditors and Trustees in Bankruptcy
• Employment Practices Claims

Your Peace of Mind is Within Reach

Call The Hull Group today and speak with one of our representatives to learn more about how your management or board responsibilities may place you at risk and how you may benefit from D&O coverage.