In figuring out the right type of insurance coverage for a company, Directors and Officers (D&O) insurance is too commonly overlooked. These policies allow company managers the coverage they need when claims are filed against them due to actions and decisions they make that are in total compliance with company policies and procedures. While these actions and decisions may be within their typical job duties, they may not go over well with every employee they oversee and every client or customer they assist. With the proper D&O insurance policy, business officers and directors are personally covered with liability, and so is the insured company.
Large companies are often on top of purchasing D&O insurance, but there are a variety of other organizations that could also benefit from the coverage. This includes for-profit businesses, educational institutions, nonprofit organizations, small businesses and private firms. Businesses in any industry need their directors and officers covered as a precaution for the individuals and the company as a whole.
What’s the Point of D&O Insurance?
Although you might only hire management professionals with the proper qualifications and skills, there is always the possibility that human error will occur. When your managers, directors and other officers make a mistake, it can come down hard on them or your business. For multinational companies, decisions are being made all over the world. Officers are required to keep their own social and professional regulations in check, as well as those of other cultures.
The protection of D&O insurance also gives your officials the room they need to make the decisions that are so crucial to business. If they are always worried that they’re going to be sued, they may walk a more fine line between the right decision for the company and the right decision for what others expect. When managers know they will be protected and backed up by the company they work for, they are more likely to take the proper risks that need to happen. They may be more likely to govern the workplace how they are supposed to do it.
Who Does D&O Insurance Protect?
When it comes to the protection from D&O insurance, the point is to keep managers safe when they are performing their regular duties. This type of policy provides protection for past, current and future officers, managers and other directors of the company. Subsidiaries of the company are also covered, which might encompass nonexecutives. Depending on the case in question, your entire company might also benefit from the coverage.
Some specific examples of risks that are common in D&O situations include:
It’s important to keep in mind, however, that your managers are not covered by this insurance if they are involved in criminal acts. Fraud, intentional noncompliance and cases in which the individual acted in a way to achieve personal gain, will not qualify for protection.
Purchasing Directors and Officers Insurance
D&O insurance is too commonly overlooked in small businesses and companies that don’t deal with multinational situations, but it doesn’t have to be that way. Your company and the people who run it deserve proper coverage. As the owner of a small business or a large corporation, you will run into human error at one point or another. Make sure your directors and officers can do their jobs without the threat of a lawsuit hanging over their heads. Give them the security of knowing that D&O insurance coverage will step in to protect them if someone else doesn’t like what they’re doing to keep your business running.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.