What Risks May a Directors and Officers Policy Cover?
Directors and Officers Insurance covers the decisions made by people involved in managing and running an organisation. Originally, Directors and Officers Insurance only covered the individuals’ liability, but now there is also the option to include cover for claims brought against the company.
There is a range of circumstances that a Directors and Officers policy may cover. Examples include:
- A manager is dating an employee and decides to promote that employee. Even if the employee in question was the best fit for the role, this can be seen as a conflict of interest, and another employee may take legal action as a result. Depending on the circumstances, Directors and Officers Insurance may cover legal fees.
- Unbeknown to the CEO, a CFO misrepresents income and expense figures on the company’s financial statements to influence current financial results. The CEO may be covered for legal defence costs under a Directors and Officers policy.
- A busy CFO signs a financial report without properly examining it. There is a mistake on the report, which results in legal action being taken out against the company. Directors and Officers Insurance may protect the CFO and the wider business against costs incurred as a result.
As a business owner, the continuing success of your company is dependant upon your ability to manage, mitigate and transfer risks. Risks like these are extremely difficult to predict, so it is imperative to back up any risk prevention strategies with a comprehensive insurance policy that can fully protect your business, your assets and your employees.