Directors and officers liability insurance, is becoming an increasingly necessary part of corporate risk management.
This liability coverage provides coverage for directors and officers, and companies, for losses and defence costs in the event of a lawsuit brought against them as a result of alleged misconduct and wrongful acts. Directors and officers liability insurance offers reimbursement to the directors and officers, or the company itself, in case of allegations leading to litigation.
Why is it Important?
Directors and officers insurance is an important liability protection, to help protect companies –and their directors and officers from serious allegations, and the implications that these allegations can cause.
Allegations against directors and officers are on the rise, due to increased regulation, and employees and shareholders becoming increasingly more aware of their rights. The increasing prevalence of lawsuits makes a directors and officers insurance policy, an increasingly necessary precaution.
What Does it Cover?
This coverage generally provides coverage for a company, and its directors and officers from claims from employees, shareholders, customers, creditors, suppliers, and even government bodies.
This coverage provides legal compensation for lawsuits that are brought on due to the director’s actions, or alleged actions, that involve the director failing in his or her responsibilities. The responsibilities of a director include a duty of care, statutory duties, and fiduciary duties –which stipulate that the director must act within the best interest of the company without conflict of interest.
Any failure to uphold these duties can lead to a potential claim, which could be financially devastating.
In merger and acquisition situations, the need for this insurance is especially important. Since more and more corporations are trading in international locations, the directors and officers must keep in mind different government bodies’ regulations, and risk management for multiple locations. This increases the complexity of the decision making process under which directors must operate.
Even the most prudent director can make mistakes –and be held personally responsible for them. The amount of decisions that managers are faced with are innumerable and complex, and often the available information on which decisions must be made is limited.
Since directors, officers, and senior managers can be named as defendants in lawsuits, these individuals should be protected under the company’s directors and officers policy.
Directors and officers insurance doesn’t extend to cover situations where fraudulent, illegal, or intentionally noncompliant action was taken. Talk with your insurance provider for more information on a director and officers policy. Call Texas Energy Insurance for more information on a policy for your company. (877) 952-1010