The participation in a Director’s Board of a company or organization is not only a title associated with rights. There are also responsibilities and these can cost you greatly.
The legal business framework is becoming increasingly severe, with greater obligations and controls. Today, the directors and officers of each company are exposed to lawsuits/claims against them, or even to fines from the authorities.
The Directors and Officers liability Insurance covers them against claims by third parties, such as customers, shareholders, regulators, suppliers, employees, etc. It covers even the fees of external consultants for the defense of the directors and/or executives, and penalties or settlements provided under the condition that there was no fault or willfull misrepresentation of their own. Errors and negligence occur in any company. Often, executives, managers and the Board members are asked to make decisions under adverse conditions such as:
– Time restraints
– Intense competition
– Restricted information
– Strict regulatory environment etc.
Good intentions will not save the company in case of law suits, especially in the recent years, when the economic crisis led many companies into bankruptcy. This had the effect of considerably increasing the number of lawsuits against directors and executives.
The reasons of the lawsuits were many, such as:
– Errors and negligence
– Fall in the share price
– Incorrect assessments etc.
Based on the above, the Directors and Officers insurance is an important protection tool for any modern company that respects itself.