Directors and Officers Insurance
Directors and officers insurance is an essential tool for any well run company. Not many people out there are able to tell exactly what directors and officers insurance actually is. It isn’t exactly a self explanatory title, but once explained, it does become clear why it is so necessary to any well run company and why so many of the larger corporations count it as a necessity. The reason that this kind of insurance exists is to protect all of the higher up members of the company, anyone in a position of higher power within the infrastructure of a company, from being sued for anything that they had to do in relation to their duties and responsibilities as afforded to them by the specific company they are working for and their job title. This is certainly not a type of insurance that the average person hears invoked on a daily basis, but those that run companies large or small, that are familiar with someone trying to take advantage of their success through the legal process of suing would be able to recognize the importance of directors and officers Insurance easily.
Why Use Directors And Officers Insurance or D&O Insurance?
Whenever someone has to make an executive decision that will cause a client or someone else of importance to the company, their money, it is a danger that the company will be sued in order to recuperate the loss. However, with all of the dishonesty that runs throughout the legal system today, people can sue for ten, twenty, even one hundred times the amount that they actually lost through their dealings with the business in question. A mix up that would have originally cost a few thousand dollars, with non quantitative issues such as pain and suffering tacked onto the original issue can end up costing into the hundreds of thousands in repayment, and that isn’t even counting the court fees yet. This would be enough to bankrupt lost of small businesses, so for them, it is absolutely essential to have directors and officers insurance. It may be a steep fee, but in order to protect the integrity of the company as well as to keep them in business, it is a necessary thing. It can also be positive psychologically for all of the people that are in positions of power within the company because they will all be able to function with a little less stress on their shoulders knowing that if they do make a mistake, it won’t be the end of the world. It is a small pro, but it is one of the many pros that outweigh the cons in the decision on whether to purchase directors and officers insurance or not.
directors and officers insurance is known as D&O Insurance
No matter how familiar a person is with the law, an unexpected lawsuit can happen at any time really. And because not just national, but international law as well is so multifaceted and nuanced, people are sued for things every day that they weren’t even sure were crimes. In this type of high stakes legal climate, why not get directors and officers insurance just in case something like this were to happen. Most of the larger investors these days would make it a requirement for a business owner to possess directors and officers insurance before they decide to invest. After all, it only makes sense that they do this, because without insurance to cover it, one mistake could mean that all of the original assets that the company possessed would be spent to cover for the mistake as well as any extra money that was put into the company by investors. They want to make sure that the money that they are investing is going to a worthy cause and won’t be squandered through amateur business practices and silly mistakes.
In addition to that kind of requirement, because of the personal investment that is necessary in taking on the title of “director” or “officer” in any business; many employees that are being promoted to the position will want to see evidence that they will be protected in the event of a mistake. They want to know that they will have something o someone to cover for them rather than assuming all liability.
It is important to stress that Directors And Officers Insurance is not insurance for negligence. That is covered by other forms of insurance. directors and officers insurance actually refers to the exact opposite situation. A situation in which the exact duties and requirements related to a specific position in a company require that this employee perform a certain action that may have unknown ramifications and could lead to backlash or suing in the future. It is used in such a situation where a company is being sued for the actions a person performed when he or she was doing exactly what was required of them.
This is why Directors And Officers Insurance is so important.
Directors and Officers Liability Insurance diversified insurance industries
Directors And Officers Liability Insurance That Saves You Money
Directors and officers liability insurance is one of the most important forms, if not the most important form of insurance coverage in the business world. With the legal system the way it is these days, the law allows for more and more seemingly illegitimate claims to money for pithy, small reasons. And with the economy the way it is, people are running out of disposable income. This unfortunate combination of low economic performance as well as a legal system that is overly lenient towards smalltime prosecutors, and increasingly unforgiving of big businesses, makes directors and officers liability insurance an absolute necessity for all companies, large or small.
Directors and officers liability insurance Quotes
Directors and Officers Liability Insurance is mostly there to protect the heads of companies, people with lots of responsibilities that work under incredibly stressful situations every day and do not want to have to deal with putting themselves and their money on the line for their company if they were to get into trouble. The specific time that this Directors and Officers Liability Insurance is applicable is when a director or officer has performed an action that was required of them as a part of their basic job duties, and this action caused someone to lose money. In the event that they sued for this, if the company had purchased this insurance, it would cover them as long as it could be reasonably proven that the decision that caused this case to end up in court in the first place was one that was required of them by the company’s rules. Recently, through some careful litigation, this term has been redefined to constitute duties that are performed by directors on behalf of company policy as well on a personal basis. Because this Directors and Officers Liability Insurance coverage is so flexible and is able to extend to so many facets of the company, it has become a necessity for any business that is interested in expanding at all.
Anyone that is at all economically savvy would understand that in order for a business to expand, they need to get collaboration from clients and other organizations. This is the entire purpose of advertising. Before a store can carry the product of a certain company, they must talk to that company and forge an agreement over what they will and won’t purchase and how much involvement the company will have in the shipment and selling of it. To form these business relationships, endless contracts must be signed, and most companies will not even be in the same room as the carrying company if they don’t have directors and officers liability insurance in conjunction with some type of insurance to cover negligence in the business place. It may be hard for some to understand why this is necessary, but it is a simple explanation. If a business feels that their investment will be wasted in any way, they will not put money into an organization. It does not matter how personable and jovial the people in the room are or what their set of morals is or their willingness to do whatever the other business asks. None of this matters once discussion gets down to cold hard cash. A business wants to know that the investment they make in another company will grow over time eventually netting them more money. This is the only reason any business deals of this nature are formed.
Without directors and officers liability insurance,
Without Directors and Officers Liability Insurance a company will look at the paperwork and instantly start dreaming up situations in which the company they are partnering with will lose their money. Perhaps it could be on a sexual harassment lawsuit, perhaps it could be a suit based on faulty product testing; the possibilities are endless. But the bottom line is, if they know that the business they are partnering with doesn’t have any insurance coverage to make up for these situations, they will know that if the situation arises where an official is sued, the money to cover the suit will come directly out of the wallets of the company shareholders and officials rather than an insurance agency. This money includes their investment. Thus, without Directors and Officers Liability Insurance coverage, all that these partnering associations can imagine is the loss of their investment. And no company wants to be involved with a business that they know has the capability to hemorrhage money at the slightest bad decision.
Luckily for smaller companies, the fewer shareholders they have, the less they have to worry about getting sued for making a poor decision. After all, when there are no shareholders to witness any mistakes made, what does it matter what mistake was made? As long as the company can continue in capacity after the mistake was made, the decision that led to the mistake will not matter to anyone but the company head. But once the company starts to develop and increase in amount of employees and officers, it will be important to upgrade to some sort of coverage so that the company is not at risk. And the first step in doing this would be to pick up a good solid directors and officers liability insurance policy.