Directors and Officers Liability Insurance coverage insures corporate directors and officers against claims alleging financial loss arising from mismanagement.
The policy contains two coverage’s: the first reimburses the insured organization when it is legally obligated to indemnify corporate directors and officers for their acts; the second provides direct coverage to directors and officers when the organization is not legally obligated to indemnify them.
Directors and Officers can be sued by stockholders, creditors, employees, competitors, regulatory bodies and other third parties. Directors and Officers Liability coverage is typically written on a “claims made” basis and usually excludes dishonest acts as well as bodily injury and property damage.
Provides professional liability coverage for directors and officers of non-profit organizations or associations. Although these policies resemble the corporate Directors and Officers Liability forms, it generally offers broader protection by providing entity coverage; employment practices liability coverage and has lower deductible or retention levels.
A form of liability insurance covering wrongful acts arising from the employment process. The most frequent types of claims are wrongful termination, discrimination, and sexual harassment. This coverage is written on a stand-alone basis but is usually available as an endorsement to Directors and Officers Liability policies.
Any organization or association that has a board of directors has an exposure.
Organizations with paid or volunteer boards should be aware that directors and officers have very specific duties and obligations. Directors and officers should be given all of the appropriate information that is required to perform their duties effectively.
More reading
You can learn more about Directors and Officers Liability Insurance at the Insurance Bureau of Canada’s website
A basic area of insurance management that deserves more attention than many firms give it is the selection of policy limits. Most uninsured losses are probably caused by selecting inadequate limits.
All insurance policies contain some type of requirement to report “as soon as possible” accidents or occurrences that may result in a claim. Failure to promptly notify your insurance broker or insurance company of known events that may lead to a liability claim can result in denied coverage for claims eventually made in conjunction with the occurrence.
Many companies make the mistake of not considering in advance the insurance implications of a new acquisition, merger, product or service. After the fact, companies often learn that they cannot obtain liability coverage or learn that it will be very expensive to cover. Consider approaching your insurance broker to find out the repercussions of your potential change in operations.
It has become common practice for one party to require the other party to include it as an “additional insured” on their policy. Failure to add an “additional insured” to a policy can lead to uninsured losses. It is important to have a procedure in place to review all contracts that may have insurance requirements placed upon you.