Properly insuring a business takes careful consideration. The process can be complicated, but understanding the options helps. In this litigious society, officers and directors need protection against lawsuits and issues arising from presumptive indemnification clauses, as referenced by the Owens Group. Here are three ways to safeguard directors and officers.
1. Review policies
Carefully examine directors and officers, or D&O, policies. Read all sections, and if any parts are unclear, consult an attorney or insurance expert. Since directors and officers can be held personally responsible for company actions, insurance policies must offer adequate protection.
2. Be wary of key corporate events.
Certain important corporate events are especially dangerous times for offers and directors of a company.
- Initial public offerings
- Mergers and acquisitions
While all three situations are often sources of litigation, bankruptcies pose special risks to directors, as bankrupt companies may not be financially able to adequately safeguard high-ranking individuals from personal financial liability.
3. Understand the forms lawsuits can take.
Depending upon a company’s business, officers and directors can face financial threats for many causes.
- Poor environmental management
- Failure to meet fiduciary responsibility
- Discrimination lawsuits
By understanding where litigation may come from, companies are better prepared to safeguard directors.
Officers of any company, large or small, could face personal liability without the right coverage. Personal financial threats to company officers and directors can be lessened with vigilance and research. Careful thought and reviews now can save troubles later.