Directors and officers insurance can protect your company’s top members from having to pay legal costs — should they need to defend themselves of alleged wrongdoing. D&O insurance has become closely associated with broader liability coverage, such as errors and omissions insurance for professional businesses.
Oegema Nicholson and Associates understands the complexities of running your own business. That’s why our brokerage offers a series of insurance products, designed to protect your most valuable assets. If you’re interested in learning more about directors and officers insurance, read our comprehensive guide on how this important coverage can benefit your organization’s most valuable members.
What does D&O insurance cover?
A company’s biggest legal expenses will typically come from defending itself against allegations of wrongdoing. Examples include accusations of misrepresentation by customers, conflicts of interest or ethical breaches. When your directors or officers are forced to defend their own actions, your corporation will have to bear the legal costs. This is where D&O insurance can be particularly helpful.
Although a company’s top brass is often indemnified by their organization’s by-laws, this isn’t the case if the company becomes insolvent. To ensure directors and officers have access to legal defence and are protected in the event they’re found liable, the best option is to invest in D&O insurance.
Depending on your policy, here are some of the items directors and officers insurance may cover:
- Legal defence costs
- Settlements and damages
- Personal assets of a director or officer’s spouse or domestic partner
How does D&O insurance work?
Oegema Nicholson can help you understand your policy, so there are no surprises should you need to file a claim. Although coverage may differ between policies, D&O insurance usually takes effect in the same way across a number of scenarios.
For example, let’s say a company is still in debt when an organization goes into liquidation. Creditors could then go after the company’s director in an attempt to recover outstanding funds. Common allegations by creditors include breach of fiduciary duty, negligence or deliberate misconduct. These creditors will often scrutinize the actions and behaviours of directors or officers — to see if any of them can be held personally responsible.
Once an accusation is made and legal proceedings begin, a claim can be filed under D&O insurance. The coverage would take care of legal expenses and settlements, even if the director is found liable. It’s important to note that D&O insurance will not cover liabilities not listed in the policy.
What are some common sources of liability?
Although claims may vary depending on the unique needs of your industry, here are some common sources of liability for directors and officers:
- Wrongful dismissal – A company’s employees can hold a director responsible for what they perceive to be wrongful dismissal
- Breach of employment contract – Should an employee feel the terms of their hiring agreement were not met, a director could be taken to court
- Breach of intellectual property – A competitor could sue the company’s officers for ‘stealing’ their intellectual property, such as a logo or systems design
- Shareholder interest – With large sums of money at stake, if shareholders are unhappy with a company’s direction, they could hold the organization’s top brass accountable to protect their investments
How can D&O insurance help my business?
This type of insurance can be useful in attracting and retaining qualified directors and officers — especially in the non-profit sector. Most non-profit organizations do not offer indemnification, which means the personal assets of directors and officers are at risk. By offering D&O insurance to top executives, your company will look like a desirable and long-term place to belong.
Why trust Oegema Nicholson?
Whether your run a national charitable organization or blue-chip corporation, rely on Oegema Nicholson to protect your company’s top executives. A high-quality D&O insurance policy can ensure the legal costs of your most valuable employees are covered. Should a competitor accuse your officers of collusion or a creditor go after your director’s personal assets — have peace of mind knowing one of our liability insurance products will cover a variety of expenses.
For more information on directors and officers insurance, call us at 613-224-1455 or contact us here.