D&O INSURANCE
“D&O liability can
come from a variety of
sources, and claims can
arise without warning. ”
BY:DARREL ZALESKI
OWNER - SPECRTUM INSURANCE GROUP
• Misappropriation of trade secrets
• Collusion
• Anticompetitive behavior
What’s more, directors and officers may be
held liable for actions that are perceived as
misleading or defamatory, with claimants
seeking damages for their alleged losses.
CREDITORS
A management team has the responsibility
for monitoring an organization’s financial
position and its ability to meet debt
obligations as they become due. If an
organization becomes insolvent, creditors
will often scrutinize the decisions of
directors and officers to see if they can
be held personally responsible and will
sometimes pursue executives in an
attempt to recover outstanding funds.
Common allegations by creditors
against directors and officers include the
following:
• Breach of fiduciary duty
and sexual harassment • Breach of duty of due care
• Breach of employment contract • Negligence
• Failure to address health and safety
concerns • Deliberate misconduct
COMPETITORS
As organizations attempt to grow their
market share, management teams must
ensure that growth is achieved through
fair business practices. If an organization’s
competitors believe that they have been
unfairly disadvantaged by dishonest
or illegal behavior, they may seek legal
recourse.
Directors and officers can be brought into
legal actions for a range of wrongdoings,
including the following allegations:
•
Breaches of intellectual property
GOVERNMENT AND REGULATORY
AUTHORITIES
Government and regulatory authorities
monitor the environment in which
organizations operate. These bodies help
ensure that directors and officers and the
organizations they control conduct their
activities in a fair and lawful manner.
Government and regulatory bodies
monitor compliance with a broad range of
laws, including the following:
•
Corporations law: Governs the
ownership and management of
organizations
• Securities law: Governs the
administration of publicly listed
companies
• Consumer protection law: Governs
the way in which organizations
distribute products and services to
consumers
• Occupational health and safety law:
Ensures that organizations maintain
a safe workplace
• Taxation law: Governs the taxation of
organizations and individuals
• Environmental law: Ensures that
industry participants adhere to
environmental restrictions
For directors and officers, the enforcement
power held by these bodies presents a
significant exposure to D&O claims. If
regulators discover that wrongful conduct
has occurred, they may pursue legal
action against the organization and the
executives involved.
SHAREHOLDERS
Due to their financial investment,
shareholders have an incentive to monitor
an organization’s ongoing performance
and ensure that directors and officers are
acting in the organization’s best interests.
With potentially large sums of money at
stake, if shareholders are not pleased with
an organization’s direction, they may take
measures to protect their investment.
If it appears that management has
breached their duties to the detriment
of an organization, shareholders may
bring a claim against directors and
officers themselves. If shareholders wish
to bring a claim against executives, legal
proceedings typically come about in one
of two ways: >
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