Running a business takes more than one person. The CEO, board of directors, managers, supervisors, and employees must work together for everything to run smoothly. If one component fails, the entire business fails. Directors and officers insurance helps protect your company from financial losses for wrongful decisions or actions of directors and officers of your company.
What Is Directors and Officers Insurance?
In today’s corporate environment, businesses face complicated lawsuits every day. To protect your company, you must understand your liabilities and the possibility of litigation during your company’s lifetime. The larger your business, the more likely you are to face a lawsuit because of the number of clients or customers you deal with regularly.
D&O coverage, or management liability insurance, covers upper management’s mistakes or alleged errors within a business. If you do not have D&O coverage, your corporate executives and board members may have to pay their defense costs and settle a lawsuit. Insurance is a safety net that helps your company and your officers afford to defend themselves or settle a dispute.
Why D&O Insurance Is Essential
When choosing coverage to protect your business, directors and officers insurance should not be optional. U.S. businesses spend an average of $1.2 million yearly fighting lawsuits. Common risk scenarios include:
A claim against upper management due to a reporting error. The claim may allege misleading financial reporting.
Claims alleging breach of fiduciary duty from a company’s creditors. Essentially, the creditors can claim the directors did not identify or evaluate the sale of assets and caused the company to default on its loans.
Litigation from a customer who claims misrepresentation. For instance, a contract may require the company to have financial and human resources assets in place, and following the finalization of the agreement, the customer finds out the company does not have the capabilities it initially claimed.
Former employers may sue for alleged theft of intellectual property. For instance, if an officer leaves one company and starts a new one, the former employer may argue that the employer took software and corporate licenses or created unfair competition.
Litigation is common in the corporate industry, and insurance may be one of the only ways to mitigate your company’s overall risk.
Who Needs Directors and Officers Insurance?
Most companies should consider D&O coverage. While some private entities and nonprofit organizations believe they do not need D&O insurance, their directors and officers can still face litigation. If your company works with customers, vendors, creditors, or employees, you must consider D&O insurance.
Having coverage protects against personal liability and will cover corporate financial losses. Additionally, people may not want to take on leadership roles in your company if you lack adequate protection. Directors and officers liability can help you attract and retain talent. Likewise, it gives you and your workers peace of mind and financial security.
Protect Your Company With Directors & Officers Insurance
Think of directors and officers insurance as your safety net. It protects those within leadership roles in your company as well as the financial obligations of your company. Without D&O coverage, your leaders may be liable in various lawsuits. To find insurance that works for your company, contact Securance today.
About Securance
From our home base in Texas, Securance serves the insurance needs of clients throughout the country and abroad. With 50-plus years as a trusted advisor to businesses, families, and individuals, we help clients safeguard their hard work and step confidently into the future, knowing they are well protected.
Contact us today at (713) 977-6606.
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