Directors and Officers Liability
An investor sues a company executive for breach of fiduciary duties. Customers allege a pattern of misconduct that your board of directors failed to detect. An executive claims she was wrongly let go due to actions by certain other executives.
These types of claims could be brought against your business at any time and could end up costing you hundreds of thousands of dollars. Let us introduce you to Directors and Officers Insurance coverage, which provides managers with the freedom to make business decisions without worry.
Read on to understand if Directors and Officers Insurance is right for your business.
What Is Directors and Officers Insurance?
Directors and Officers Insurance covers management and executives for claims made against them while they are serving on a board of directors and/or as an officer of an organization. In layman’s terms, Directors and Officers Insurance covers claims resulting from decisions and actions taken by company managers as part of their job duties. An organization’s officers typically include key executives and managers, but not all employees. Policies cover defense costs and damages arising out of wrongful act allegations and lawsuits brought against an organization’s directors and/or officers.
The United States is the world’s largest Director and Officers Insurance market, and the most frequent claims are those related to HR and employment issues, such as sexual harassment, wrongful termination or discrimination. The most expensive claims, however, are usually made by regulators and shareholder groups. Third party claims are most common when a company declares bankruptcy, and claimants try to hold managers liable for the company’s failure in an attempt to collect investments or debts.
Directors and Officers Insurance is necessary to enable managers to make decisions without having to worry about personal liability. Directors and Officers coverage allows managers to settle claims quickly and discreetly. Even if an insurer ultimately doesn’t cover a loss, Directors and Officers Insurance can still be useful because it will cover the defense costs for the claim.