Directors & Officers Liability - Demystifying Management Liability

What is Directors & Officers Insurance?

  • Directors & Officers Liability is the personal liability assumed by a director officer of an organization solely due to their position within the organization.

  • Personal Liabilities may arise in tort, in contract or as a result of Statutory provision.

  • Directors & officers may be held jointly and severally liable with their corporation as well as with their fellow directors and Officers.

Why do Directors and Officers policies exist?

  • Times have changed…we are becoming a more litigious society.

  • Directors and Officers do not want to risk their personal financial security from any claims against themselves or their families.

  • Organizations cannot afford to finance claims and/or lawsuits against themselves or their Directors and Officers.

  • Other policies leave gaps in coverage:

  • Commercial General Liability policy excludes coverage for financial loss against the organization and/or its directors and officers for wrongful acts.

  • Errors & Omissions policy includes the financial loss but only with respect to professional services rendered (i.e. professional liability), D&O insurance  is not meant to cover liability for professional services rendered.


What reasons would there be to have Directors & Officers Insurance?

  • In the event of a claim, it helps to prevent serious disruption to management’s time.
  • It provides protection against potential loss of personal assets.

  • It protects corporate assets from the costs of expensive legal proceedings.

  • It provides access to claims and legal personnel in this field of expertise.

  • Awareness of D&O claims potential will improve corporate governance to mitigate future loss exposures.

  • It provides a framework for a focused corporate strategy for dealing with claims allegations and lawsuits.

  • Premium is paid by the organization, not the individual director and officers.

  • Protection against past wrongful acts that have gone undetected via unlimited retroactive coverage.


What does Directors & Officers Insurance cover?

Coverage for past, present, future directors, officers, and their spouses, employees, volunteers, trustees and committee members for claims made against them and/or the organization for which they are providing services

Note: Independent contractors are not covered.

The coverage's encompass defense costs as well as settlements and judgments.

Coverage is often triggered from the following allegations:

Mismanagement of funds
Errors, misstatements
Libel/slander, breach of duty
Employment wrongful acts

Coverage is provided for compensatory damages stemming from economic or financial losses.

The policy provides sever-ability – protection for individual directors and officers from the actions of others.

Who makes claims against Directors and Officers?

Employees or volunteers for:

Wrongful termination
Breach of employment contract
Harassment / humiliation
Defamation of character (libel/slander)
Adverse employment conditions (safety)

Clients,shareholders or members for:

Misappropriation of funds
Defamation of character (libel/slander)
Breach of fiduciary duty (dishonesty/fraud)
Contract disputes

Suppliers, contractors, creditors for:

Contract disputes
Conflict of interest
Business interference
Breach of fiduciary duty
Copyright / patent infringement

Government or regulatory bodies for:

Failure to deduct and remit employees contributions as required by the Canada Income Tax Act.
Failure to comply with provisions of federal Bankruptcy and Insolvency Act.

Call the Team at Peake & McInnis Ltd. today so we can put a Prince Edward Island Directors & Officers Insurance Policy in place for your operation. 902-566-5534.




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