The Necessity of Director and Officer Insurance
A business of any size is always susceptible to lawsuit, whether a large corporation or small business. The problem with such lawsuits is that they can come from anyone at anytime, with little or no warning, warranted or otherwise. When this happens, a company can lose a lot of time and money to defending itself from these allegations. In order to minimize this effect on the company and its employees, there is insurance available for the directors and officers of a company, helping to protect themselves from personal liability from a lawsuit against the company for which they work.
One of the biggest deterrents of this type of insurance is in its oversight. Businesses carry all types of insurance, from property insurance to workers compensation insurance to personal injury insurance for all employees. These policies protect all aspects of business: property insurance protects the equipment, physical location and any surrounding property from theft, disaster or other damage; workers compensation insurance protects the company and it's employees in the event of an accident. However, many companies overlook the need for director and officer insurance, as it is rarely needed.
A lawsuit can be detrimental to the workings of a business, as it can stall productivity for long periods of time, resulting in loss of income. In addition, if there is monetary settlement as part of the ruling of the lawsuit, it can result in further loss of assets. These are common concerns when a company is faced with a lawsuit. Often overlooked is the officers and directors of a business and how the lawsuit affects them personally. Decisions that the men and women in these upper level positions make can create discontent among consumers, which can result in lawsuits. Director and officerinsurance protects them from lawsuits and helps to cover any settlements and legal fees that may be incurred during the legal proceedings. The integrity or correctness of the lawsuit is not in question; even if there is no fault associated with the directors and officials, there can be serious legal bills, and this insurance can ensure that those involved are not bankrupted.
This differs from liability insurance. Liability insurance protects the holder from any liability as the result of a lawsuit. Director and officer insurance specifically protects the decision makers from the repercussions of their decisions in case they are brought to trial for any reason. It is a more refined and specific insurance rather than general liability insurance.
Carrying insurance is necessary for a company, as it helps to protect from all manners of unforeseen issues that can set a company back or cause monetary problems. Director and officer insurance is just one more way for the decision makers of a business to be protected from any legal action that may affect them personally.
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