Directors & Officers

Directors & Officers Insurance

In today’s world, stakeholders and the public are aware of their rights and are pro-active about seeking redress when they feel that they have been poorly treated or suffered an unnecessary financial loss. With this in mind, directors and officers, whether corporate or not-for-profit, need to protect themselves by ensuring they are aware of their obligations and properly insured.

Risk management

As always, the first step is risk management. Most directors and officers are aware that their fundamental duties include acting at all times with:

• Care, diligence, and skill
• Honesty, loyalty and good faith

However, ensuring that you have acted in good faith doesn’t necessarily protect you from being sued – there are still legal costs at stake, even if negligence isn’t found. Often, directors and officers assume they will have indemnity from their corporation or organization, but that isn’t always the case. If the organization is insolvent, or unable to legally provide indemnity, or in cases of fraud or malicious acts, then the company’s policy will not provide protection.

Are your directors and officers vulnerable?

The most common allegations requiring defense by directors include:

• Acting beyond the scope of their authority
• Giving wrong or unprofessional advice
• Breach of fiduciary duties
• Authorizing excessive company spending
• Failure to supervise subordinates or company affairs properly
• Making unauthorized company borrowing