Running a corporation has become one of the most dangerous things someone can do these days. From coming under fire from various sources like the government monitoring regulations, to shareholders demanding everything be done one way, to the Occupy movement sweeping down, finding, and protesting any bad business practices. It takes a lot to try to stay afloat when there is so much against a corporation, so many have opted to protect themselves and their directors and officers. Utilizing this D&O insurance, corporations can protect themselves in the long run by providing the legal fees necessary to squash any legal issue before it turns the company on its head.
Many times a corporation will undergo some sort of lawsuit in its time. From unpaid wages to employees to shareholders crying about mismanagement of funds, there is almost always someone who wants a piece of the corporate pie. What has happened before is that these lawsuits were often costly to the company, taking long hours in deliberations and resulting in enormous settlements that the corporation just couldn’t pay. This resulted in the corporation going belly-up, becoming bankrupt and no longer able to stay in business. D&O insurance stops this from happening, as it is a way to protect the corporations’ directors and officers from coming under fire and ultimately ruining the corporation. For example, if a shareholder has a claim against an officer of the corporation for mismanagement of funds, then the D&O insurance in place already sets up a limit that the company will pay in order to have every operate smoothly. What D&O covers is generally legal costs, lawyer’s fees, and the amount that the court orders the directors or officers to pay. This eliminates a long, drawn-out trial that has the potential to cost the corporation exponentially more.
Going to court to settle a lawsuit is never a fun time for all parties involved, and it’s even worse when misconduct has been found and yet another corporation has been found guilty of bad business practices. It happens all the time, but for many companies who wish to remain in business, just doing the right thing might not cut it anymore. A lot of people working for a big corporation mean a lot of different mindsets and motivations. With D&O insurance, there is a safety net for those businesses that wish to remain truthful and honest to do so, and minimize any damages they might receive.