Directors & Officers (D&O) Insurance

What is Directors and Officers (D&O) Insurance?

If you serve on a board of directors for a business or non-profit organization, you want to make sure that both you and the organization you serve are protected against financial loss in the case of legal action. While the organization you serve may be protected under their own insurance policy, this policy won’t protect you if a client, employee, competitor, or government regulator launches a personal lawsuit against you. With directors and officers insurance, you can focus on serving your organization in the most professional manner possible, knowing that your personal assets are safe.

How Does Directors and Officers Insurance Work?

As a director or officer, you are responsible for upholding certain standards including standards set by the organization you serve, obligations to shareholders, and federal or provincial regulations. If an allegation is brought against you or your organization’s board of directors for failing to upholding these standards, directors and officers insurance can provide coverage for legal defence fees and even settlement costs.

Do I Need Directors and Officers Insurance?

Whether you’re a board member for a publicly traded transnational corporation, or a board member for a small non-profit society, directors and officers insurance can give you the protection and assurance you need to carry out your duties safely and effectively.

Directors and Officers Insurance for Public and Private Corporations

In the case of publicly traded corporations, the actions of directors and officers are often protected by the corporation’s bylaws. However, in cases of alleged personal wrongdoing by a director or officer, or in cases of company bankruptcy, officers and directors can be held personally responsible for allegations, which means their personal assets could be at risk. Similar situations can also arise within smaller, private companies. In order to ensure that directors and officers of private companies and publicly traded corporations are sufficiently protected from personal damages, a directors and officers insurance policy is the best option.

Directors and Officers Insurance for Non-profit Organizations

Board members of non-profit organizations can also benefit from directors and officers insurance coverage. Just because an organization doesn’t seek to make a profit as part of their mission, that doesn’t mean they’re less likely to have to deal with litigation. In fact, a 2012 Towers Watson survey found that non-profit organizations were subject to twice as many directors and officers lawsuits as for-profit companies. In addition, while charities in Canada are protected by certain charitable immunities laws, this doesn’t prevent actors from declaring personal legal action against board members.

Tips from First Foundation

Directors and officers insurance isn’t just something organizations should have in place to protect them in the event that something goes wrong; offering a strong directors and officers liability insurance package can also be a major asset to your organization. Many organizations choose to provide directors and officers insurance coverage for their board members as a measure to attract the most qualified individuals to serve on their board.

Interested in finding out more about how directors and officers insurance can benefit you or your organization? Talk to us today or fill out the form below for your free directors and officers insurance quote.

Last updated Feb 11, 2019