Common Directors & Officers Liability Risks and Claims

All companies strive to take diligent care selecting their directors and officers, yet that doesn’t mean things can’t go wrong. It is wise for businesses to carry directors & officers liability coverage as D&O lawsuits do happen. Here are a few common risks that could happen in your company:

  • Theft – This isn’t the occasional ream of paper or other supplies that end up in the home of one of your directors or officers. This pertains to much more devastating conditions, such as the theft of intellectual property. It isn’t uncommon for someone to leave a company to start up their own and take proprietary software or other information to give them an unfair advantage competitively.
  • Misrepresentation – Integrity is important and the lack of it can sometimes end up in a D&O lawsuit. For example, in the desire to be awarded a lucrative contract, a director or officer could misrepresent the abilities of the company. Should the customer find this out later and sue, you’ll be glad you have directors & officers liability coverage.
  • Employee Issues – Employees can often feel they were unjustly treated and file a lawsuit involving the director or officer they feel is to blame. This can involve wrongful termination or a discriminatory practice in promoting and earnings.
  • Breach of Fiduciary Duty – Losing money almost always results in a lawsuit. For example, if a creditor feels the directors or officers failed to accurately disclose finances to get credit approval or a third-party contractor believes there was some sort of collusion that kept him from getting a lucrative contract, your company could face a D&O lawsuit.

There are different types of directors & officers liability coverage available for privately held businesses as well as for-profit and non-profit entities. If you’d like to discuss your company’s vulnerabilities and how to know which coverage is best for your situation, give us a call at First Security Insurance.