If you don’t have Directors and Officers’ liability insurance, it’s probably because you’ve been told you don’t need it. Let’s find out if that’s true.
For starters, what is it? D&O insurance is what keeps you out of hot water if you’re sued in your capacity of a director or officer of a company. When a claim is made against the company, there’s a chance you personally can be held legally responsible. Obviously, not ideal.
Next question: Who can sue you? Any number of professional interactions put you at risk of litigation. Investors, vendors, customers, employees, competitors– whoever deals with you in your capacity as a director or officer.
Okay. And why? Misuse of company funds, fraud, failure to meet corporate governance guidelines, lack of compliance with workplace laws. In the litigious landscape we live in, the potential claims are limitless. Inc.com breaks down the “101” of D&O liability, and remind us that one in six company executives are expecting D&O related losses in the coming financial years. Figures pulled from a 2008 Towers Watson survey also found that one in eight had already gone through a D&O lawsuit in the last year.
So. Why aren’t you insured? Probably because you’ve heard you don’t need it. There are some myths floating around about who needs and doesn’t need D&O insurance. Let’s unpack them.
MYTH #1 – Unless you’re on the board of a publicly trading company, you don’t need it.
Not the case, according to D&O insurance expert Lisa Jones, of Chubb Group of Insurance companies. As she told Inc.com, as long as you intend to deal with vendors, outside customers or investors, you’d better bolster up your insurance plan, because you’re at risk of a lawsuit dropping in your lap.
MYTH #2 – Your business’ general insurance policies will take care of it.
Again, no. Typically, when it comes to management liability lawsuits, personal liability for directors and officers falls outside that umbrella. Read your general policy carefully to see what you are and are not covered for.
MYTH #3 – D&O policies are only for bigger companies.
Not the case. Any business that has directors or officers could be at risk of litigation, regardless of the company’s size. That’s why insurance companies offer more affordable policies to match the company’s size and value.
There it is. Not only is D&O insurance necessary, it’s also affordable and always tailored to suit you. Get in touch to talk about your options.