4 Reasons You Need Directors & Officers Insurance
Directors and officers play important roles in businesses across that country as they form the management team of a corporation. These are professionals who supervise important business affairs and are responsible for making decisions (Directors) as well as overseeing the daily aspects of the organization (Officers).
As these professionals are crucial parts of corporate governance and decision-making, it is imperative to make sure there is a safety-net in case mistakes are made. This is where insurance comes in.
As stated by Southwestern Insurance Group, “D&O Insurance provides coverage for defence costs and damages from wrongful acts allegations and lawsuits brought against an organization’s board of directors and/or officers. This includes negligence, omissions or misleading statements made by the directors and officers that result in a lawsuit being filed against the corporation.”
Not convinced? Here are 4 more reasons.
Negligence & Breach of Contract
Ultimately, the responsibility lies at the helm of the directors if there is a breach of corporate statutes dealing with income tax, environmental concerns, as well as other reasons.
Moreover, the corporate world is a minefield of litigation and small print which leaves directors vulnerable to general laws of breach of contract and negligent misrepresentation as a result of their actions.
Having D&O Insurance allows for the directors of an organization to be safeguarded against such fine margins.
Conflicts of Interest
As mentioned above, Canadian corporate law requires extremely careful navigation to ensure that there is no malpractice. An example of this is the Canadian Business Corporations Act which requires directors to disclose any and all conflicts of interests between themselves and the boards that they serve.
This can then mean that a director who has disclosed such a conflict may need to refrain from voting on matters that directly affect the interest in question.
In fact, in some Canadian provinces, the laws are even stricter and prohibit directors in this situation from even attending meetings in which any of those interests may be discussed.
Duty of Care
Duty of care perhaps is the simplest one to understand – under Canadian statutes, all directors must exhibit the care, diligence, and skill that a reasonable person would exercise in similar circumstances.
In other words, duty of care laws exist to ensure that directors don’t go rogue. Moreover, it adds extra responsibility to the directors of a corporation to educate themselves and take the appropriate steps to make the best decisions they possibly can.
Fiduciary Duty
Directors serve as the fiduciaries of the organizations that they serve. This means that they have to take into account the interests of the various shareholders when making decisions – as well as the interests that best serve the company.
However, the interests of the corporation must always outweigh those of individual shareholders. This means that it is the responsibility of a director to disclose any significant information that has been sourced from others whilst also being obliged to maintain the confidentiality of a corporation’s sensitive information.
With D&O Insurance, directors and officers find themselves protected against the pitfalls of corporate law. Given D&O liability “pays on behalf of individual directors, officers, trustees, volunteers, employees, and members of any duly-constituted committee damages and expenses in the event they are sued in conjunction with the performance of their duties with the corporation.”
This means that D&O Insurance doesn’t just protect the directors and officers, but it protects the organization as a whole. It pays out on behalf of the corporation and further provides full entity coverage.
D&O Liability Insurance is an absolute must-have in the modern day so contact your Hubbard Insurance Advisor at 905-696-9090 or email us at