Directors and officers insurance provides coverage in the event of claims against the acting directors or officers of various organizations. A typical question for groups considering purchasing this insurance is, which of these directors and officers benefit most from this insurance? Proper coverage for directors and officers is always beneficial, but it is especially important in the following settings.
Publicly or Privately Held Companies
Directors and officers serving in either type of company can face significant liability. Officials running publicly held companies are accountable to shareholders, while those in charge of privately held companies must answer to investors. In either case, there is always a possibility of directors or officers making missteps (or being accused of doing so) while overseeing the company.
The directors and officers of non-profit organizations may be vulnerable to claims for unlawful practices, mismanagement of funds, violation of the organization’s charter and more. The risk of inadvertent misconduct may also be high. Since many of these directors and officers work on a voluntary basis, they may have less business experience than their counterparts in other organizations.
The directors and officers of influential institutions, such as financial, educational and public institutions, may also need directors and officers coverage. These leaders often make decisions that are financially or otherwise impactful, which can expose them to claims.
Protecting Professional Interests
Before ruling out a directors and officers insurance policy, decision-makers at any of these organizations should consider the potential losses that the organization and its leaders could face during a claim. Even if claims seem unlikely, this insurance can be highly worthwhile, given the serious consequences that just one claim can have.