Primary Sources of Liability for Directors and Officers

Not only can it be lonely at the top, as the old adage contends, it can be fraught with liability. When high-level company staff-that is, directors and officers (board members) of an organization-perform their duties in their capacity as senior management, in doing so they can be at risk in the event they commit a wrongful act.

Coverage offers protection for wrongful acts at the top

Directors and officers insurance, also known as D&O insurance, is designed to protect directors and officers from for personal liability or financial loss stemming from wrongful acts they may commit while functioning in their capacity as directors and officers. For example, if the chief financial officer of a firm absconds to parts unknown-and takes all the money in the company coffers with him-the remaining board members and other senior-level staff would be covered in the event they were sued over the matter. Essentially, the coverage works to protect directors' and officers' personal assets and ultimately, the company's assets.

Some companies offer the optional coverage to be added to the Directors and Officers policy to cover risks stemming from employment practices (Or, in many cases, Employment Practices Liability insurance can be purchased.) This coverage provides liability protection stemming from matters such as sexual harassment, discrimination, or wrongful termination lawsuits.

Claims are likely to come from a variety of business activities and developments

Do you know where are the biggest risks of D&O claims? For partners and members, as well as shareholders and investors, the major sources of claims could arise in any of these situations:

Mergers and acquisitions

Financial performance and financial reporting

Matters of executive compensation

Conflicts of interest issues

Bankruptcy

Insufficient or incorrect disclosure

Stock or other such offerings

D&O claims brought by clients and consumer groups are most frequently based on the following:

Granting or refusing to grant credit

Collection of debt

Unfair or deceptive trade practices

Dishonesty

Disputes over contracts

Issues over the quality or cost of a product or service provided

Lender liability

D&O claims can also arise from competitors and other third parties, particularly stemming from the following practices:

Infringement of copyright or patent

Defamation

Business interference and other competitive disputes

Breaches of antitrust

Potential acquisitions

Taxation

Regulatory and other government-required policies

A Business Insurance for Peace of Mind

Many people are turning to starting their own small business recently. With the economy struggling and many losing their jobs, a lot of these people have decided to go into business and be their own boss. While this is a great and a boon to the local economy, very often people fail to consider that they may need to have some coverage for their business. A business insurance can help provide you with the peace of mind you need to know your business is covered.

Whether you are new to owning a business or have owned one for several years, you still need to have some type of business insurance to cover you in times of need. Many may not think it is something important to have, but the first time some catastrophe occurs, they realize how much they do need it. It is best to investigate it up front and get started right away as soon as you start your business ventures.

If you are a contractor or builder, there are many parts of running this type of business that require insurance. If you have people working with you and for you, you will need to have some type of worker's compensation insurance in case someone is injured on the job. You will also want to consider coverage for things like your equipment and tools in case something ever gets damaged or stolen.

You may want to be sure you have some type of liability coverage. This will not only cover your business equipment, but it takes care of any losses or damages that may occur to a person or to property while you are conducting your business. Make sure the coverage is enough where you could comfortably pay for someone's medical bills should an accident happen.

There are also options you can seek out with business insurance. If you have a car or truck for your business, you will need business auto insurance. Professional liability can help cover you for any mistakes that may occur in your work.

An umbrella policy may also help. These give you some extra insurance protections. It can cover things that would not be covered when you have exhausted other insurance.

When you are looking for a business insurance, be sure to take your time. Ask all the important questions and get competitive quotes to see what is best for you. Once you have your policy, you can rest comfortably knowing you are secure.