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Directors & Officers Liability Insurance


Directors & Officers Liability Insurance Information

Directors & Officers Liability Insurance

 

A business doesn't have to have shareholders in order for its directors and/or officers to be personally sued.  A business of any size will usually have officers and possibly directors who can be targeted by litigants over their management of company affairs.

What Is Directors & Officers Liability Insurance?

D&O liability insurance protects corporate directors and officers in the event they are personally sued -- often in addition to the company being sued -- by investors, employees, vendors, competitors, and customers, among other parties. The insurance protects directors and officers by covering legal fees, settlements, and other costs; in addition, the coverage sometimes can extend to protect the company if it is named in a suit, as well.

Who Needs Directors & Officers Liability Insurance?

Directors and officers are sued for a variety of reasons connected with their company positions, including misuse of company funds, misrepresentation of company assets, fraud, failure to comply with workplace laws, and lack of corporate governance among other issues.

Directors and officers can be personally sued by shareholders, creditors, employees, suppliers, customers, competitors or regulators. Suits can be bought for various reasons. Shareholders might sue for insider trading. Creditors might sue for misrepresenting the financial health of the company. Competitors might sue for anti-trust or unfair trade practices.

Being personally sued can be crippling for individual directors or officers. Just the risk of lawsuits might cause qualified individuals to refuse to take director or officer positions, or it could motivate existing officers or directors to act with excessive caution in pursuing a corporation’s interests. By insuring directors or officers against personal liability for their own wrongful acts, directors and officers insurance addresses these concerns.

 

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