Directors and Officers Liability
Directors and Officers liability insurance is an insurance policy written and designed to protect directors and officers of a company or the company itself from potential losses, lawsuits or liabilities. This policy will pay or reimburse directors, officers or organizations for losses or possible fiscal requirements associated with the defense, investigations or alleged wrongful acts of said lawsuits or liabilities. Most Directors and Officers liability insurance policies are customizable for the unique needs of each corporation or organization.
A privately held company and its directors and officers can be sued for a broad range of alleged wrongdoings, including:
• Breach of fiduciary duty/mismanagement of the business and operations
• Wrongful interference with a contract
• Failure to deliver services
• Disclosure of materially false or misleading information
• Unfair trade practices
• Consumer protection violation
• Violation of state and federal laws
Such lawsuits can hurt a company financially, as well as threaten the personal assets of its directors and officers. It is a common misconception that general liability insurance and umbrella liability insurance will take care of every possible lawsuit. However, general liability insurance typically does not cover the financial consequences for the alleged wrongdoings listed above. Directors and Officers without liability coverage could be forced to pay for lawsuits out of their own pockets.
A Board of Directors will almost always require Directors and Officers liability insurance in order to mitigate any fiscal liabilities associated with potential lawsuits. In addition, most venture capitalists will require Directors and Officers liability insurance before investing in a corporation or organization.
It is therefore important to speak to a licensed insurance agent to be sure that your company, organization and its directors and officers are adequately insured against any future claims and/or potential claims. If you are considering D&O Liability Insurance please see our quote information.