Directors and Officers Liability

Today, more than ever, individuals serving on boards of directors of public corporations, private companies and non-profit organizations are being held accountable for the actions – and inactions – of the businesses they oversee.

Liabilities of directors and officers can arise in many ways, including allegations of breach of common law duties, breach of duties owed to shareholders, and statutory liabilities imposed by federal or provincial laws.

Directors and officers liability provides coverage for defence costs and damages (awards and settlements) arising out of wrongful act allegations and lawsuits brought against an organization’s board of directors and/or officers.

Public, private or non-profit. We’ve got a D&O solution for you.

Directors' and Officers' liability for public companies

Often the greatest cost in dealing with an allegation against a corporation, or its directors or officers, is the legal cost of defending the action. In many circumstances, directors’ acts are indemnified by their corporations’ by-laws. However, in the case of insolvency of a corporation or allegations of wrongdoing by a director, legal costs may not be covered. To ensure directors have access to legal defence and are indemnified in the event they are found liable, the safest option is often to ensure that a D&O policy is in place.

Directors' and Officers' liability for private companies

While private companies may not have the same exposure as publicly traded companies, they are exposed to securities litigation, allegations of misrepresentation by creditors or customers, conflicts of interest and/or other breaches of fiduciary duty. Wrap+® covers defence costs, settlements and judgments associated with these, and many other types of claims. Also, Wrap+® protects the personal assets of a director’s or officer’s spouse or domestic partner, as well as a deceased director’s or officer’s estate.

Directors' and Officers' liability for non-profit organizations

The responsibilities of individuals serving on a non-profit board of directors are similar to those of directors of for-profit companies. However, non-profit organizations have limited resources to indemnify directors and officers or respond to expensive litigation, settlements or damage awards. Where no indemnification or only partial indemnification is available, the personal assets of directors and officers are at risk, as well as those of the entity itself. Directors and officers liability coverage is a critical component of the overall insurance protection package that no non-profit organization should forgo, particularly if it wants to attract and retain qualified and motivated directors and officers.

To learn more about our D&O coverages, contact your insurance broker or locate a Travelers Canada broker near you

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