1. Personal Assets are at Risk.
If Directors are accused of breaching one of their duties, they might be personally liable to defend the claim. Without adequate D&O insurance, their personal assets could be threatened.
2. Attracting Talent.
Individuals may be reluctant to take on a role as a director without the protection of a D&O insurance policy. Without D&O coverage, organizations can struggle to find the right people to serve in key corporate positions.
3. Security in Bankruptcy.
Businesses facing financial difficulty sometimes go bankrupt. In bankruptcy, creditors can pursue legal action against directors and officers if they feel that they have not acted in the organization's best interests.
4. Protection from regulators.
Each day, regulatory bodies carry out investigations for potential corporate wrongdoings. As a result, regulatory bodies often impose costly fines against businesses.
5. Small and medium-sized enterprises (SMEs) are at risk.
SMEs are not exempt from D&O claims. In fact, they face many of the same risks and regulations as their larger peers, but often do not benefit from in-house HR or legal teams.
6. Competitor lawsuits
If an organization's competitors believe that they have been unfairly disadvantaged by dishonest or illegal actions, they may seek recourse through legal action. Competitors may sue directors and officers for a wide range of perceived wrongdoings.
7. Employee practiced claims are on the rise.
In an increasingly litigious society, employment practices claims such as sexual harassment or wrong dismissal can force directors to defend themselves against legal action. These claims can result in costly settlements for plaintiffs and put directors at risk.
8. Protection from shareholder actions
Due to their financial investment, shareholders have an incentive to monitor an organization's ongoing performance. Disgruntled investors may file suite against directors and officers if they are unpleased with an organization's direction.
9. Buyer's market
As more insurance companies have entered the market, competition has created broader coverage and reduced premium rates for policyholders. This combination makes D&O insurance and affordable risk management solution for most businesses.
For more information on D&O Insurance contact Carriage Trade Insurance
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