Individuals that serve as board members or executives of organizations expose themselves personally to costly lawsuits for their actions and decisions they make while serving in their capacity as a director or officer.

This means personal assets could be forfeited in order to pay legal expenses and contribute to an eventual judgment. In an increasingly litigious world, Directors and Officers liability insurance protects board members and executives for wrongful acts committed – or alleged to have been committed.

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Policy Features

Directors & Officers have a duty to exercise due diligence in overseeing the management of the organizations they serve. This involves three basic duties:

  1. Duty of Diligence: Act reasonably, in good faith and in the organization’s best interest

  2. Duty of Loyalty: Place the interest of the organization before your own

  3. Duty of Obedience: Act within the scope of applicable bylaws

If a director or officer breaches any of the basic three duties, they can be held personally liable for ensuing damages.

In addition to the three basic duties, a director or officer can be held personally liable for:

  1. Failure to act as stated under a statute: for example, if a statute requires the filing or maintenance of certain records, and the directors fail to do so, they may be held liable under that statute
  2. Organizational Non Compliance with a statute: directors may be liable for financial losses, wrongful dismissal, employee discrimination, employee harassment and unsafe working conditions.

A Directors & Officers Liability policy with an Employment Practices extension can help mitigate the risks faced by directors and officers for the decisions they make while serving the organization.

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