Directors and Officers Insurance in New Brunswick

It is vital that you understand the importance of proper D&O insurance. Directors and officers may be sued by the organization or company for which they work or volunteer. They may also be sued by other former or current directors and officers, investors, employees, customers, vendors, competitors, government officials, consumer groups as well as a number of additional third-parties. Even though the entities that may take legal action against a director or officer are vast, the situations that can lead to the filing of a lawsuit are limitless.

A minority shareholder in one family-owned company took legal action against the top shareholders on the company's behalf. The claim was that their fiduciary duties were breached. According to the claim that was filed, the majority shareholders were drawing large bonuses and excessive salaries, which led to the company losing money. Even though the ruling was in favor of the majority shareholders, the cost of their defense was hundreds of thousands of dollars.

An employee was hired by a manufacturing company away from a competitor and brought that person on as an officer. In a year's time, the company where that person used to work took legal action against not only that person, but also the company that hired him. It was alleged that trade secrets were misappropriated by that person, which was in violation of the provisions of the termination agreement.

In another case, a complaint was filed against a competing company that claimed that a former employee that now works for the competitor took part in the unauthorized use of proprietary and confidential data. It was also alleged that the person was involved in other acts that were not fair to the competition. Therefore, the company that filed the complaint claimed that it had suffered immediate and irreparable injury. It was also claimed that the former employee was holding intellectual property and confidential information.

Fortunately, there are a wide variety of insurance types that are designed to protect individuals in situations such as these.

What Is Directors and Officers Insurance?

D & O insurance is relevant to the duties and performance of management personnel of a company. It is designed protect the directors and officers of a company or organization against civil, criminal, administrative and regulatory proceedings on the basis of wrongful acts, breaches of duty, misstatements and negligence.

An insurance policy gives directors and officers of a company the financial protection they need in the event that legal action is brought against them for anything in conjunction with the performance of their company related duties.

D&O insurance often includes employment practices liability and may also include fiduciary liability. Employment practices liability relates to discrimination and harassment issues, which are the most common risk exposures for this type of policy.

As a director or officer of a company, there are important responsibilities that fall upon members of the board. It becomes important that you are protected from claims that could arise from your involvement. When you carry the right insurance, you have the necessary coverage to mitigate the costs and legal expenses that can arise from allegations of wrongful acts or negligence.

Many directors and officers make the mistake of assuming that the company's general liability policy will provide coverage for such actions. However, those policies typically only cover claims that arise from bodily injury or property damage. In addition, such policies often specifically limit or exclude coverage for directors and officers.

Yes, You Really Do Need D & O Insurance

Directors and officers insurance is an essential part of the success of not for profit groups and company directors and officers. This coverage will protect the organization from claims that may be made against the board members, directors and company officers, including:

  • Misused Funds - It only takes a single person believing an investment or purchase was improper to bring about a lawsuit, which can lead to expensive legal costs even if the directors and officers are found to be free of any responsibility.
  • Improper Treatment of an Employee - Claims of wrongful termination, harassment and other forms of mistreating an employee by a member of the board will be covered by D & O insurance.
  • Negligence in the Performance of Official Duties - Failing to fulfill duties that are required by an official position may lead to a lawsuit, but such a claim will be covered by D & O insurance.

At Pearson Insurance, we have a dedicated commercial department that will handle your individual business needs. The time to purchase insurance is right now. The cost of the premium for this type of coverage is well worth the peace of mind that you get knowing the most important people in your company are protected. Do not wait until it is too late. Contact our commercial department to get a quote and discuss available coverage options today at (506) 432-1550.