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.