Risk & Business Magazine Benson Kearley IFG Magazine Winter 2018 - Page 27

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 plough@bkifg.com or 289-340-0680 27