by Alison Neumann

The Ins and Outs of Directors & Officers Liability


Mismanagement. Bankruptcy. Financial mishandling. Employment discrimination. If you are in the position to make decisions in your business, you could be held personally liable for the consequences of those decisions, no matter how good your intentions were at the outset.  Any party who holds an interest in the company and believes they were hurt based on your decision can expose the possibility of legal action.  This kind of situation can become very costly very quickly.  Events such as change of control in a company, dishonesty of a director or officer, dramatic change in share value, boardroom disputes, and poor trading results can all cause a legal tangle.  Lawsuits and legalese have the power to bury any of us, especially if you are directors, officers, or members of a management team.

The good news is, protection and insurance for a situation like that is available in the form of a directors and officers liability policy.  These policies protect the company, directors, officers, employees, and spouses of employees if they hold an interest in the business.  A directors and officers liability policy is appropriate for both non-profit and for-profit businesses, large and small.

Directors and officers liability policies can offer protection against claims arising from employment disputes including wrongful dismissal or discrimination, sexual harassment, bad advice, conflicts of interest, unauthorized payments, decisions made outside the scope of authority, and more.  The policy can protect you monetarily if you are held liable for damages, legal costs, and expenses in a claim.

If you or your company is even accused of management mishandling, that has the potential to damage your reputation and brand.  Directors and officers liability policies can protect you and your business and help settle a dispute often without court actions.  If you have any questions regarding your business insurance or directors and officers liability insurance, contact your agent today.

Sources:

www.cinfin.com/business-insurance/products/management-liability

www.trafalgar-intl.com

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