| By :
Cedric Welsch
Directors and officers insurance is increasingly important in a world where litigation is more prevalent. This kind of specialized policy is intended to serve two functions. It protects the leaders of a business from being held financially liable for the performance of their duties. The policy may also protect management against discrimination and harassment suits, both at the liability and fiduciary level. You should obtain this type of policy when your business incorporates and installs a board of organizational directors. Often, the board will demand that they be protected against lawsuits related to the way they do their job. If your organization is a non-profit, it is even more important to provide protection against liability for actions taken in the performance of their duties. Although D&O insurance is often compared with errors and omissions, in practice they are intended for different purposes. Errors and omissions liability protects against failures in performance of your products or services rather than in the performance of the board. E&O also protects against negligence. Most directors and officers insurance is utilized in employment practices lawsuits and complaints. These can include accusations of harassment and of discrimination. When there are employees, employment practices lawsuits of all different types can be initiated. The leaders don't want to be the target of lawsuits directed against the company. Sometimes suits are initiated by employees, but they may also be brought by shareholders and other officers. D&O insurance is needed to protect the personal assets of the board members of your company. When a person agrees to serve on the board for a company or non-profit organization, they don't do so with the fear that they will be held personally liable for lawsuits directed against the business or organization. When a lawsuit is initiated against the company, it often names the primary leaders individually in the suit. When an employee or contractor brings suit against a business or organization for unfair employment practice, it is often because of actual or perceived discriminatory actions. Sometimes the lawsuit is to gain redress for sexual harassment charges. In either case, the policy protects the people who serve on the board and the officers of the organization from personal liability. Provision of directors and officers insurance protects the individuals from business related lawsuits. It also helps your business to recruit and retain top leaders. They need not worry about being financially ruined due to duties undertaken in the name of the organization.
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