Top 10 Reasons for D&O Insurance

Top 10 Reasons for D&O Insurance

Directors’ & Officers’ Liability Insurance (D&O) protects corporate managers at all levels if they are personally sued—often in addition to the company being sued—by shareholders, employees, vendors, competitors, customers, government bodies, and creditors, among other parties.

D&O coverage can provide a team of experts to help you navigate the process. D&O covers legal fees, settlements, and other costs. It can extend to protect the company if it is named in a suit as well.

  1. Directors’ personal assets are at risk
    If accused of breaching their duties, they are liable, and assets are potentially at risk if there is no D&O coverage.
  2. Bill C-45 “Westray Bill” amendment to Criminal Code
    This bill provided new rules for attributing criminal liability to organizations, including corporations, their representatives and those who direct the work of others; it imposes criminal liability for negligence and other offences.
  3. Defending a legal action can be costly
    Legal costs for defending allegations against the company or one of its directors can often run into tens—and even hundreds—of thousands of dollars, not to mention the time commitment required of you/your team.
  4. Employment practices insurance
    Employment practices insurance, a type of D&O coverage, is, in essence, a human resources malpractice coverage specifically designed to respond to claims/ litigation about sexual harassment, wrongful dismissal, demotion or failure to promote.
  5. Your competitors can sue you
    Canadian antitrust laws maintain and encourage competition in Canada. Your competitor may challenge you/your company on your practices.
  6. Protection in case of bankruptcy or insolvency
    Statutory Liabilities in Canada can mean exposure for unpaid and unremitted taxes and/or suits by creditors in the event of insolvency or bankruptcy of the company.
  7. Groundless/unfounded claims still need to be defended
    You don’t have to be wrong to be sued!
  8. D&O Claims are NOT covered under any other liability policy
    A common misconception is that alleged misconduct by directors or companies is covered under other liability policies, such as Commercial General Liability.
  9. D&O insurance is more affordable than ever
    A D&O policy can cost from $1500 per year, yet the total cost of a D&O claim can run into thousands/hundreds of thousands of dollars.
  10. D&O helps attract talent
    Having D&O insurance in place can be attractive for talent considering joining a company—they know they will be protected.

Private companies face increased scrutiny from various sources, and the volume of lawsuits and investigations against private companies continue to rise. D&O insurance provides an invaluable means to cover the ever-increasing costs incurred by companies to combat such actions.

To assess your level of risk for a D&O claim, fill out the Risk Scorecard in our D&O Guide (page 10).

Click here for more information on D&O insurance coverage, or give us a call at 780.424.2727. Click here to get a quote