What is Directors and Officers Insurance?

Many people depend on the leadership of an organization for their financial well-being and future security. Directors and Officers (D&O) are obligated to give their best “good faith” effort to all that do for the organization and any stakeholders. By taking a position of leadership, they acknowledge that they will act in the best interest of the organization. This means that they will make every reasonable effort to work toward the success of the business even above their own interests. They are also obligated to know, understand, and follow all of the organization’s bylaws and any applicable regulations. 

Unfortunately, we all make mistakes. When a Director or Officer makes a mistake, it can have a huge negative impact on many people. They can be held liable for any actions that violate their core obligations. D&O Insurance, also known as Professional Liability Insurance covers this unique type of organizational liability. D&O coverage puts a layer of protection in place when leadership inadvertently fails to meet their obligations. 
 

Is D&O Coverage Necessary?

When organizational leadership fails to meet specific obligations, ignorance is not a legitimate reason. Director and Officers can be held liable regardless of their level of knowledge. In addition to proper information transfer and onboarding, proper liability coverage is essential.

Liability can persist through resignation or indemnity. Therefore, it may not be enough for the liable party to simply remove their affiliation with the organization. 
 

What are the benefits of D&O Insurance?

Proper insurance can provide coverage for the defence cost derived from breaches of obligation. In addition, it will cover judgements and fines for situations where liability is confirmed. D&O insurance provides peace of mind knowing that an inadvertent mistake will not detract from the overall vision and purpose of the organization. 

Professional liability insurance can rescue a career that would otherwise be damaged beyond repair. It can also protect the core values and mission of an organization.