If you’re a director or officer working for a small- to medium-sized business, you may have assumed that your organization doesn’t need to have directors and officers insurance. Indeed, many executives working for companies of your size make this erroneous assumption. They believe that it’s unlikely they will be sued because their annual revenue stream isn’t in the tens of millions of dollars. However, the need for this policy is often greater among smaller organizations as they don’t have access to the resources of larger corporations.
What Does It Cover?
Even though your company is small, claims of mismanagement and wrongful acts can still be brought against your directors and officers by customers, investors, employees, competitors and others. D&O liability insurance will protect against many of these. Some of the allegations covered by this type of policy include:
- Breach of workplace laws
- Contravention of fiduciary duty
- Failure to disclose a conflict of interest
- Misuse of funds
How Does It Work?
When a suit is brought against the directors and officers of your business, most insurance companies will help you manage the lawsuit. This can be especially helpful for smaller organizations that don’t have previous experience with litigation. Moreover, in the event of bankruptcy, the insurer will protect the personal assets of your executives from claims brought by investors, creditors, trustees and others.
Ensuring that your company has the D&O coverage it needs can be complicated. Consulting an expert in this type of insurance can help make sure that your directors and officers are properly covered.