Directors and officers liability insurance (D&O) is designed to cover the directors and officers who oversee the company’s affairs. This policy is needed because these individuals can be charged with liability for an ever-increasing number of actions and inactions. By definition, a company can include non-profit organizations, charitable trusts, and civic associations. The one common thread tying them together is the concept of a “duty” owed by an officer or director to its constituents such as shareholders, employees and the corporation itself.
D&O liability came about as a solution to such matters as breaches of fiduciary duty and good faith that were beyond the common law courts. This helps explain why the legal structures governing the conduct of these individuals are often vague and subject to differing interpretations.
It may also explain why the area is such a fertile field for litigators. Anyone suffering any sort of damages, from a sharp drop in the share price or a wrongful termination, can scrutinize corporate activity and then accuse the manager of having breached a corporate duty. NewMark understands how D&O works and can provide insurance products to deal with the difficulties surrounding such claims.
D&O policy is an integral part of your liability coverage
Many consider D&O coverage as an integral part of any corporation’s liability package. Originally it was a way to protect the officers and directors, as well as the corporate entity, and was mostly concerned with business litigation. Now, however, there are many different types of issues involved, like public policy concerns, fraud, unfair competition, employment practices, and exposure of trade secrets.
D&O policies don’t cover criminal activities; they are concerned exclusively with civil remedies, mainly damages awarded. Therefore the only criteria are in determining whether a director or an officer has breached one of his basic duties to the extent that the aggrieved party can recover.
All business ventures involve a certain amount of risk
Private company risks are less concerned with securities violations. Their main exposure is to employees, but any company that employs one or more individuals or deals with customers, clients, competitors, the government, or other third parties has a D&O exposure, making the need for directors and officers liability insurance all the more prevalent. Let NewMark provide you with the coverage that you need.