What You Should Know About Directors And Officers Insurance

Written By: Pete Miguel on April 19, 2010 No Comment

Directors and officers insurance has become the norm in the corporate world, thanks to the increasing number of lawsuits brought against companies and their leaders for failure to perform the duties according to the charter or the law. A D&O policy also provides liability and fiduciary protection for the same officers when there is a lawsuit claiming harassment or discrimination.

You should obtain this type of policy when your business incorporates and installs a board of organizational directors. Often, the board will demand that they be protected against lawsuits related to the way they do their job. If your organization is a non-profit, it is even more important to provide protection against liability for actions taken in the performance of their duties.

Although D&O insurance is often compared with errors and omissions, in practice they are intended for different purposes. Errors and omissions liability protects against failures in performance of your products or services rather than in the performance of the board. E&O also protects against negligence.

Employment practices lawsuits are the most common type of action brought against organizations. Employees claim that they have been discriminated against and sue the business and the directors for redress. There may also be allegations of sexual harassment as a cause for litigation. Shareholders and other officers of a business may also be the individuals who initiate lawsuits.

D&O insurance is needed to protect the personal assets of the board members of your company. When a person agrees to serve on the board for a company or non-profit organization, they don’t do so with the fear that they will be held personally liable for lawsuits directed against the business or organization. When a lawsuit is initiated against the company, it often names the primary leaders individually in the suit.

When an unfair employment practices action is brought against the corporation, it is commonly due to incidents or alleged incidents of sexual harassment. Sometimes charges of discriminatory actions are named. The D&O coverage protects the personal assets of the leaders of the company.

Providing directors and officers insurance is one way to make certain that you can obtain the best qualified people to serve on the board of your organization. You want good people, but they want good protection. They don’t want to run the risk of financial ruin due to successful lawsuits against the business.

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