As corporate leaders, directors and officers are entrusted with shaping the future of an organization. This responsibility amounts to major decisions that impact operations and inform long-term growth. Because of these responsibilities, directors and officers spend long days making tough calls, each resulting in rewards or consequences for the organization.
Taking on the role as a director or officer of public, private, and not-for-profit companies means being the face of growth — and the one that the general public, customers, and other concerned parties look to for answers when something goes wrong.
As leaders, these custodians are tasked with exercising due diligence in management and acting in good faith and in the best interest of the organization. Every action — or inaction — taken to comply with these basic duties affects the well-being of stakeholders. Or, impacts compliance with commercial regulations, making them accountable for exposures to potential liabilities.
Top leaders are essential to the continuity of business and future growth. For this, their pioneering work must be protected against liability claims. Anything stemming from allegations of breaching the law, duties to shareholders, and other regulations imposed by the federal or provincial government in Nova Scotia and New Brunswick.
When a director or officer is accused of breaking the law or being negligent towards stakeholders, customer relationships and industry partnerships are jeopardized, the financial stability and future of an organization is at risk.
Directors and officers insurance is comprehensive liability protection that shields an organization from the impact of an alleged breach or negligence. This covers the cost of legal fees and damages, such as court-ordered awards and settlements, when it’s proven that the board of directors and top officers acted in bad faith. The comprehensive coverage of directors and officers liability insurance helps secure a company’s assets and protect its financial health by shielding the company from expenses required to settle such claims and regain the trust of stakeholders.
Publicly traded companies are exposed to the highest liability risks due to the large scope of operations and volume of stakeholders whose interests are impacted by legal violations and negligence. Typically, a large company can cover the legal defence of its directors and officers, as stated in their by-laws. Still, in the event of insolvency or direct allegations of wrongdoing by its leaders, a D&O policy can ensure personal access to a legal defence.
Private companies have a relatively limited exposure compared to publicly traded ones. However, the board of directors and officers can still be exposed to securities litigation, as well as claims of misrepresentation by creditors, conflicts of interest, and employee litigation. Having a D&O insurance plan in place ensures coverage for legal fees, as well as protection for a director’s personal assets to avoid being seized and liquidated as compensation.
Commercial entities typically have resources to cover legal fees and survive the financial fallout of a scandal involving their top leaders. Most non-profits don’t have access to the same resources. At best, most non-profit organizations can only partially support legal fees, which puts both their, their directors’ and officers’ assets at risk of seizure. D&O insurance protects against that, securing both the organization and its leaders from the financial fallout of a liability.
Archway Insurance understands the value of strong leadership required to foster growth in business. That’s why our brokers work with major providers to equip corporate leaders in Atlantic Canada with necessary resources to rise above negligence, legal breach claims, and restore normal operations. Our brokers also help you manage existing liability risks and ensure directors and officers always act in the best interest of the company and its stakeholders.
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