Directors and officers (D&O) liability insurance protect corporate directors and officers as well in the event that they’re personally sued for actual or alleged wrongdoing when managing a company/firm.
“The insurance helps cover defense costs and damages (awards and settlements) arising out of wrongful action allegations and lawsuits,” explains Angela McKerlich, surety and construction risk advisor with CapriCMW insurance, a member of the Canadian Broker Network (CBN).
Why does your company need D&O Liability coverage?
“There has long been a misconception that Directors & Officers claims only really impact public companies,” McKerlich says. “However, all types organizations can be vulnerable to D&O (Directors & Officers) exposures.”
Your directors and officers can personally be sued over their management of company affairs, even if you’re not a large firm.
Today, employees are more aware of their rights than ever before, and they’re not afraid to exercise them – even if that means pursuing a class action lawsuit. The associated costs of lawsuits arising from D&O exposures have become so heavy that D&O insurance is now a necessity for many businesses. “Organizations that don’t have this coverage, risk going bankrupt or sustaining losses from which they will struggle to recover properly,” McKerlich adds.
Business leaders/owners can be held liable for their company failing to comply with regulation, or provide a safe and secure workplace, or for operational failures/mismanagement resulting in losses.
Common claims brought against directors and officers:
- Lack of, or poor corporate governance.
- Company or stock underperformance.
- Breach of fiduciary duty resulting in financial damages or bankruptcy.
- Failure to comply with laws and regulations.
- Employment practices and HR issues.
“The list goes on as new exposures like cyber liability continue to gain prevalence, the complexity of the risk landscape surrounding directors and officers is growing quickly.”
Risk Management tips to reduce your exposure:
While risk management for directors and officers can take many forms, what’s most important in this area of your business is to remain proactive, McKerlich advises. “Risk management is a proactive process that manages those risks and results. The purpose here is to avoid, reduce or prevent risk from imposing negative consequences.”
McKerlich offers the following risk management advice to help reduce/prevent exposure:
- Policies: Develop written procedures for decisions that have the potential to adversely affect someone and ensure that your company policies are adhered to.
- Personnel: Ensure that all staff and volunteer positions have written job roles & responsibilities.
- Training: Encourage professional development for directors and staff, and provide training for volunteers.
- Insurance: Talk to your broker about insurance options, utilize your risk management advisors and have them present these options to you.
Talk to an expert insurance broker now about coverage solutions that best suit your Construction firm’s unique needs.