Think your business doesn’t have directors and officers (D&O) liability exposure? Think again. When it comes to possible D&O claims, many businesses are left in the dark.
D&O claims deal with the decisions and policies made by directors and executives in an organization. Although some people associate D&O claims with stockholders, these claims can actually come from a number of sources, including employees, customers, competitors, investors and regulatory bodies.
The broad scope of D&O claims means that many for-profit and non-profit businesses have exposures. This includes smaller companies as well as large ones, whether they are privately held or publicly held.
When alleged mismanagement results in financial loss, a D&O suit may follow. For example, this may happen if the company’s directors make poor business deals during mergers and acquisitions or when selling properties.
Misrepresentation is another common category of D&O claims, especially when it comes to the misrepresentation of the company’s finances or capabilities. For example, clients may sue if they feel the company has mislead them. Likewise, investors, lenders or donors could sue if they felt they were misled regarding the organization’s finances.
Breach of Duty
If directors and officers fail to carry out duties, or if they are accused of having done so, they may face a D&O claim as a result. This could happen, for example, if officers fail to stop illegal activity within the company or ignore a potential risk. Failing to adhere to the board’s bylaws could also result in a D&O claim.
D&O policies do not provide coverage for intentionally unlawful acts. Instead, these policies provide coverage against various allegations of wrongful acts and unintentional misstatements or omissions.
Additionally, D&O coverage is separate from General Liability insurance, Employment Practices insurance and Fiduciary Liability insurance. Each of these products provides important protection for the various exposures faced by today’s companies.