DIRECTORS & OFFICERS INSURANCE
I
f you knew your personal assets
were at risk would you take steps
to protect them? Business owners,
in the capacity of Directors &
Officers (D&O), have a personal
liability if they fail to act honestly and
in the best interest of the corporation.
This Personal liability means that their
personal assets are at risk if a claim is
made against the Directors and Officers.
D&O policies can be set up to cover
publicly traded companies, privately held
firms, not-for-profit organizations and
education institutions. It is important to
understand the need for D&O coverage
and be educated on the wide variety of
claims.
insolvent, decisions of directors and
officers will be examined and they
may be held personally responsible.
Allegations commonly include:
negligence, deliberate misconduct,
breach of duty of due care, or breach of
fiduciary duty.
60% of
all D&O
claims are
made by
current
or former
employees
D&O claims can stem from many
sources, but here are the most common:
EMPLOYEES
It is often surprising to learn that
60% of all D&O claims come from
current and former employees. If an
employee feels mistreated (or actually is
mistreated) they will often turn to legal
action if they brought their concerns to
management and felt those concerns
were not properly resolved. This could
include, but is not limited to, claims
of: wrongful dismissal, breach of
contract, health and safety concerns, or
discrimination.
COMPETITORS
Competitors will target a company if
they believe they are being unfairly
disadvantaged in an illegal or dishonest
way. This may include accusations of:
collusion, anti-competitive behavior,
breaches of intellectual property, or
misappropriation of trade secrets.
CREDITORS
The management team is responsible for
the financial position of the company,
particularly when it comes to debt
obligations. Should a company become
GOVERNMENT AND
REGULATORY AUTHORITIES
Government and regulatory bodies are
responsible for monitoring compliance
with laws, including the following:
• Corporations law – Governing the
ownership and management of
organizations
• Securities law – Administration of
publicly listed companies
• Consumer protection law – The way
in which products and services are
distributed to customers
• Occupational health and safety law –
Maintenance of a safe workplace
• Taxation law – Taxation of
individuals and organizations
• Environmental law – Making sure
companies adhere to environmental
restrictions
•
Directors and officers are responsible
for the conduct of the company with
regard to these laws.
SHAREHOLDERS
Due to financial investment in the
company, shareholders have an incentive
to monitor what the organization is
doing and make sure that the officers
and directors are working in the best
interest of the organization.
CUSTOMERS
An organization relies on its customers
for success. Disputes stemming from
those customers, in fact, could lead to
bankruptcy of the company if they go
far enough. Lawsuits could stem from
contractual disputes, debt collection,
refusal to extend credit, discrimination,
or related to a products or service.
NEXT STEPS
While other forms of corporate
insurance products protect the company
assets and liabilities, Directors & Officers
insurance specifically addresses the
personal liabilities of the company
executive team – the controlling minds
of the business. While you may think
“this will never happen to me,” the risk is
worth the conversation.
BY: PETER LOUGH
COMMERCIAL ACCOUNT EXECUTIVE
BENSON KEARLEY IFG
Contact him today at
[email protected] or
289-340-0680
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