Business is an ever-changing industry, and current developments have caused a growing risk for company management, such as the board members, directors and officers. For example, as shareholders have become more active, more cases have occurred where they will sue management in response to their losses, whether or not there is even any sign of someone doing something wrong. In these situations, there was often just a bad judgement call or an unavoidable challenge that lead to these unfortunate losses, but a company shouldn’t lose more in response to something they could not stop. Insurance D&O (directors and officers) policies can cover these claims or legal fees.
Why Is It So Important?
As mentioned earlier, things are changing in the business environment. Whether a company is public, private or non-profit, cases of people making allegations against a business are increasing. Corporate decisions can be protected with insurance D&O polices, allowing management to continue on without loss from their honest mistakes. Coverage usually incorporates private assets of the business as well as the personal assets of the management, and may also include Employment Practices Liability (EPL) for cases where fair decisions of employee termination and other actions may be involved.
Without proper management, a company falls apart. When the directors and officers are put at risk, it makes it increasingly difficult to manage a company. Protection of these managers can ensure that decisions and actions are properly taken without risk of loss for inevitable accidents.