Directors/Officers liability insurance provides monies to cover the defense costs that may arise from legal actions being filed against your Directors/Officers due to a breach of duty or negligence of fulfillment.

Directors/Officers are expected to do their jobs to the best of their ability: by making decisions based on what is ethical, compliant, fair, and in the best interest of the company they serve. However, people – like life – can be unpredictable.

If a Director/Officer makes a choice where they;

• Do not act in a manner that is in line with the company’s guidelines
• Place their own priorities over the establishment’s
• Do not abide by governing bylaws

they are subject to legal action being brought against them.

Who needs Directors/Officers Liability coverage?

Any company with a board of directors, whether you are a corporation (for profit or not-for-profit) or a charitable organization.

Your board of directors is held responsible for:

• Actual or alleged negligent acts
• Errors or omissions
• Misleading or erroneous statements
• Non-compliance or neglect of duty.

Statute non-compliance may include any or all of the following:

• Not keeping and/or filing records that are required to be kept or filed
• Wrongful dismissal of an employee
• Discrimination against an employee
• Not attempting to rectify environmental damages.

Directors/Officers may be held personally liable for any statute not observed, even if they did not know or they resign. A company’s protection may not be sufficient to shelter them.

If sued you may owe for legal defense costs, damages, bankruptcy, and amounts owed to the government, creditors or shareholders.

What can you do to minimize risk?

Ensure your Directors/Officers have awareness training and instruct them on the bylaws of the company, so they know what statutes to abide by. It should be made clear to them that the company’s interests must come first, and personal agendas should not influence their decision-making. Share the director’s indemnification policy that details their rights, obligations, and the protection available to them. Make certain that the operating policies and procedures manuals are used by all employees. Ensure confidentiality: there are times when privacy and discretion are not only desirable but a legal requirement of the position. Keep a detailed record of how decisions were made.

We all make mistakes. Protect your Directors and Officers with liability insurance.