As leaders of a private company, directors and officers can be held personally liable for the decisions they make. Is your company’s board of directors comfortable with their level of personal risk?
Being privately owned doesn’t mean that the decisions of your board are immune from public scrutiny. Shareholders, employees, customers, competitors and even the government can bring action against your company and its board. Legislation and regulatory activity continue to impact the exposure of directors and officers to liability lawsuits.
Directors and officers liability insurance, commonly referred to as D&O liability, is necessary protection for your company. D&O covers damages, costs of litigation or both when your directors or officers are sued for wrongful acts while carrying out their corporate duties
Typical lawsuits against a board of directors include allegations of:
- Mismanagement of operations or company assets
- Self-dealing and conflicts of interest
- Misrepresentation during the sale of company assets
- Misrepresentation in a private placement and brochure
- Acts beyond authority granted in by-laws
- Violation of certain state and federal laws
Each of these types of litigation can last several years, becoming a financial burden and a continuous drain on your company’s profit margin. Company indemnification can offer protection, but sometimes this coverage is not enough. If a company cannot indemnify its directors, officers or employees, then this financial burden can become the personal responsibility of those parties.
Your company’s directors and officers are the prime decision makers for your future. As they help navigate your company to its desired goals, it’s important that they aren’t putting their personal assets at risk.
For more information on directors and officers (D&O) liability insurance, contact the experts at McGrath Insurance Group at 508-347-6850 or visit our website at www.mcgrathinsurance.com.
*This article is written for informational purposes only and should not be construed as providing legal advice.