As evidenced by its name, directors and officers liability insurance protects directors and officers of both profit and nonprofit companies. If these professionals are sued for alleged wrongful acts, the insurance acts a financial resource, assisting them in the payment of various legal expenses.
Why Businesses Need D&O Insurance
Liability insurance covers directors and officers when they are sued for:
- Errors and omissions
- Misleading statements
- Breach of duty
Claims originate from a variety of sources, including employees, clients, and stockholders. With fire potentially coming from all sides, directors and officers cannot afford to go unprotected. Even if a claim is filed against the company as a whole, these professionals can still be held predominantly responsible for the wrongful acts committed.
Why Does D&O Insurance Cover
Directors and officers liability insurance covers various legal fees, including defense expenses and financial damages. Though a policy offers broad financial protection, there are certain expenses it does not cover: wages, fines, penalties, and multiple damages. Business owners should discuss the particulars of their policy with their insurance company to determine the scope of their coverage.
How to Acquire Insurance
Wrongful acts, whether alleged or actual, breed damaging consequences. Businesses that have yet to acquire directors and officers liability insurance should contact an insurance company immediately. There are various policies available that offer a comprehensive form of financial protection.