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Directors and officers insurance provides liability coverage for the directors and officers of a business if they are sued in conjunction with the performance of their duties as they relate to the company. D&O insurance is a recommended coverage for businesses as soon as a board of directors is assembled.
Directors & officers insurance can usually include employment practices liability and oftentimes fiduciary liability. Fiduciary involves harassment and discrimination suits, and is where the majority of your exposure will be.
D&O insurance is necessary because:
- Claims from stockholders, employees, and clients will be made against the company and against the directors of the company. Since a director can be held personally responsible for acts of the company, most directors and officers will demand to be protected rather than put their personal assets at stake.
- Investors and members of your board of directors will not be willing to risk their personal assets to serve as a corporate director or officer, no matter how heartfelt their belief in your company.
- Employment practices lawsuits constitute the single largest area of claim activity under directors and officers policies. Over 50% of D&O claims are employment practices-related.
Be careful not to confuse D&O insurance with errors and omissions liability. E&O is concerned with performance failures and negligence with respect to your products and services — not the performance and duties of management.
Interested in a free quote? Contact Metropolitan Risk today for a thorough review of your Directors & officers insurance needs; and start protecting your business today!
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