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Directors & Officers Liability for Businesses in Need

Directors and officers liability insurance (D&O) is designed to cover corporate activities. At anytime, the corporation and the directors and officers who direct it can be charged with liability for any number of actions or inactions. In many cases, where corporate interests may clash with those of individuals responsible for managing business affairs, the coverage may differ in how it is applied.

While an indemnity policy protects the corporation, a D&O policy from an Orlando insurance agency covers the individual acts of directors and officers. There are times when the coverage can be tied to the same events, but if the corporation is the subject of litigation it will be covered solely by the indemnity policy.

What is covered by a D&O policy?

A D&O policy can cover private companies, public companies, non-profit organizations, charitable trusts, and civic associations. One common thread tying them together is the concept of a “duty” owed by an officer or director to his or her constituents, such as shareholders, employees and the corporation itself. For example, the Board’s failure to properly notice elections, or decisions by the Board resulting in physical damage to the association’s property shows a lack of proper duty or care.

D&O liability came about as a solution to such matters as breaches of fiduciary duty and good faith that were beyond the common law courts. Anyone who suffers any damages, such as a sharp drop in share prices or a wrongful termination can scrutinize corporate activity in the light of hindsight and then accuse the manager of having breached a corporate duty.

Many consider D&O coverage an integral part of a slew of liability concerns. There are many different types of issues involved, including public policy concerns, fraud, sharing trade secrets, unfair competition, and unfair employment practices.

D&O policies don’t cover criminal activities, as they are concerned exclusively with civil remedies, and for the most part, damages. The only criteria are determining whether a director or an officer has breached one of his or her basic duties to the extent that the aggrieved party can seek recovery.

Private company risks are less concerned with securities violations as their main exposure is to employees, but any company that employs one or more individuals or deals with customers, clients, competitors, the government, or other third parties has a D&O exposure, thus making the need for D&O coverage from an Orlando insurance agency crucial.