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Director & Officer Insurance coverage


With the decline in economic activity, it is expected to see more and more legal action taken against Directors & Officers of corporations for wrong doing that causes financial losses. When we hit hard times we tend to blame others more and we are also more willing to take those we blame to task for the alleged wrong doing.

Directors & Officers can be held personally liable for misuse of funds, misappropriation of funds, knowledge of illegal or improper acts, making improper loans, fraudulent acts, transactions or decisions, which are not authorized by the bylaws of the corporation.

Directors & Officers can be held liable for improper conduct to Shareholders or members for the management of funds, Creditors for breach of trust and misappropriation of funds, Employees and Volunteers for unpaid wages and unsafe working conditions.

Many people believe that incorporation creates some kind of legal veil of limited liability behind, which they can hide. This is not the case. Directors and officers of a corporation are responsible for their actions and the actions of the corporation and in some instances the actions of other directors. The courts have assessed damages against directors of corporations for wrongful actions and in some cases the laws carry specific legal responsibilities for directors.

The D & O policy is designed so that the insurance company is responsible to defend the Directors & Officers from legal action due to a wrongful act and to pay the costs and damages including the cost to defend.

Here are some questions to ask yourself:

Are our premises well protected from burglary or theft by dead bolt locks, and alarms? Are your procedures such that they will discourage, prevent or reduce the possibility of fraud, errors and mismanagement? Are there limits or coverage that could be reduced or eliminated?