One of the surest ways to sink a business is to operate as if nothing will ever go wrong. In reality, there are likely going to be bumps along the road for any venture we take part in. That’s okay because we can bank on our own experience and resilience to handle these issues over time. However, the best way to prevent your business from sinking itself over time is to prepare for the worst.

Directors & Officers Insurance, frequently referred to as D&O Insurance, is a type of liability insurance that protects the personal assets held by the executives of your organization.   In some cases, it can protect the organization itself.

D&O Insurance will help your business stick together and prevail through challenging times when legal or financial circumstances challenge your day-to-day.

Unfortunately, we see far too many businesses that either don’t have D&O coverage or opt for the wrong policies. We believe it’s important for businesses of any size to protect themselves and their employees from potential financial hazards.

What does D&O Insurance Cover?

D&O insurance works to cover the holes other forms of insurance won’t cover for your business. It essentially covers the decisions of directors and officers when things go wrong.

We want to walk through a couple of examples to give you an idea of what is covered.

Example 1:

Directors of your organization decide to sell off a real estate holding on behalf of the organization. During the course of the sale, the sale is challenged by a third party who makes a boundary dispute.

These disputes can prove costly for your organization when the value of the property is diminished, but when this person challenges the sale your directors who made the decision won’t face personal financial liability.

Instead, the insurance would cover much of the loss as long as no wrongdoing is found.

Example 2:

Within your group of directors, one or a few directors get involved in a scheme to launder or steal company money or assets. After an investigation, it was determined that those individuals were able to steal $1 million worth of company money and property.

Thankfully, D&O insurance covers the directors who were not involved in the scheme and recovers the company’s financial loss.

Example 3:

An executive is fired for bad behavior in the office. This leads to an ugly departure and said executive decides to sue your organization.

D&O insurance would protect your organization in this situation, but only if other directors and officers are found to not have been involved in any of the behavior. Your organization’s court and other legal fees may also be covered by the D&O insurance which could save a lot of money.

What isn’t covered by D&O Insurance?

It’s important to understand the intentions and limitations of D&O insurance.

Injuries on work premises or at work events, harassment, workplace discrimination, and cyberattacks are examples of incidents that likely won’t be covered under D&O insurance.

At the end of the day, the insurance policy will generally cover those who weren’t in the wrong when a financial issue arises.

It’s best to work with a trusted insurance broker to make sure all backdoors are covered for your organization. D&O insurance is one of the many forms of insurance your company and your employees should have to protect against disaster.

At Concerto Law, we pride ourselves on finding legal solutions that break through the noise. Contact us today to make sure your business is protected and on track.