Directors & Officers Insurance (D&O)
Proper leadership is always going to be crucial for the upbringing of an organization, regardless of its size. For any organization, getting the right people in critical roles is essential. When it comes to the individuals serving on the Board of Directors, they are often held accountable for the actions — and inactions — of the businesses they oversee. As a result, a prerequisite to attracting a top-notch board is D&O insurance, making sure your leaders are able to make bold decisions without fear.
Who Needs D&O Insurance?
Given the increased regulatory scrutiny, statements and decisions by your directors and officers can make headlines very quickly. This could result in costly and time-consuming litigation, ultimately to the detriment of the company. Therefore, in general, any company with a Board of Directors should consider D&O coverage. This applies equally to public, private and non-profit organizations. D&O coverage will not only help you attract the best leaders, but also allow them to operate with fear.
Quite often, new directors or officers will demand D&O coverage as a condition of employment, as a way to protect their personal assets. Sometimes investors will require D&O policies before injecting capital to ensure they protect their investments.
What is covered? What is not covered?
D&O insurance protects the company against “wrongful acts” such as errors, omissions, breach of duty, neglect and misleading statements made on behalf of the company. Coverage generally extends to past, present and future directors and officers of the company
D&O Insurance may cover…
- Employment and HR practices (e.g., wrongful termination)
- Shareholder lawsuits (e.g., feeling that an equity fundraising resulted in unfair dilution)
- Reporting issues, or inaccurate disclosure (e.g. in financial statements)
- Misrepresentations in the company prospectus
- Failure to adhere to local laws and/or regulations
D&O does not cover…
- Intentional acts
- Illegal or personal profit
- Property damage and bodily harm
- Legal proceedings or claims already taken or underway when the policy begins
Zensurance is Canada’s leading online commercial insurance broker. We offer a full range of insurance products to small businesses, with a particular focus on startups. We understand what it is to be a startup, and know the most common risks of which you should be aware. Based on that (and a lot of analytics), we recommend the ideal insurance coverage for your business.