| The Facts On Directors And Officers Insurance |
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| Written by Pete Miguel |
| Friday, 16 April 2010 10:00 |
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Directors and officers insurance is increasingly important in a world where litigation is more prevalent. This kind of specialized policy is intended to serve two functions. It protects the leaders of a business from being held financially liable for the performance of their duties. The policy may also protect management against discrimination and harassment suits, both at the liability and fiduciary level.
Directors and officers insurance is increasingly important in a world where litigation is more prevalent. This kind of specialized policy is intended to serve two functions. It protects the leaders of a business from being held financially liable for the performance of their duties. The policy may also protect management against discrimination and harassment suits, both at the liability and fiduciary level. The specialized policy should be obtained when a business becomes a corporation with a board in place. In many organizations, the policy is required by board action. This is particularly true when the organization is a non-profit corporation, since board members often serve without pay. Those in higher positions need protection for personal assets and holdings. It is important to note that D&O policy is not the same as errors and omissions. They serve different but very important functions in the world of business. Errors and omissions liability policies protect against performance failure in the product or services provided by the organization. They also prevent the officers from being held personally liable for negligence. Employment practices litigation is the most common reason for claims against the D&O insurance policy. Employees might claim that your business allowed sexual harassment or discrimination to occur. The board don't want the danger of personal liability for the actions of the business or organization. Such lawsuits can be initiated by employees, by contractors, by shareholders or by other members of your management roster. D&O insurance is needed to protect the personal assets of the board members of your company. When a person agrees to serve on the board for a company or non-profit organization, they don't do so with the fear that they will be held personally liable for lawsuits directed against the business or organization. When a lawsuit is initiated against the company, it often names the primary leaders individually in the suit. When an unfair employment practices action is brought against the corporation, it is commonly due to incidents or alleged incidents of sexual harassment. Sometimes charges of discriminatory actions are named. The D&O coverage protects the personal assets of the leaders of the company. Provision of directors and officers insurance protects the individuals from business related lawsuits. It also helps your business to recruit and retain top leaders. They need not worry about being financially ruined due to duties undertaken in the name of the organization. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. In dire need of top class business interruption insurance cover? Get the super inside skinny now with our guide to business owner policies. |