The Need for Company Directors Liability Insurance

The Need for Company Directors Liability Insurance

Big-dollar payoffs make the headlines with regularity, spinning tales of directors and officers who have made what has been judged a wrong move and will pay a hefty price for doing so. It doesn’t matter how large or small your business is, and it doesn’t matter whether your firm is privately held or publicly traded – company directors liability is a real risk for officers and directors who could be targeted by claimants for their management decisions or handling of company matters.


So what’s a suit all about?


As leaders of the organization, directors and officers face claims from a dizzying variety of situations levied by both employees and customers, including:

  • Employment practices (such as wrongful termination or discrimination)
  • Failing to comply with workplace laws
  • Misrepresentation of company assets
  • Misuse of company funds
  • Fraud
  • Employee piracy


Industry expert says that not purchasing a policy is “foolish”


Confirms the head of an insurer that writes these policies, the risk of a professional liability claim extends to companies of various sizes, and a company’s directors and officers can be sued personally even if the company doesn’t have shareholders. It’s important to keep in mind that these claims are generally not covered under one’s general liability or even umbrella policies, which typically exclude protection for claims involving management liability.


Some firms assume that the coverage would break the bank. Of course, they aren’t thinking of the six – or seven – figure payout that could be the outcome of a lawsuit. That’s what one small Los Angeles-based company thought; with fewer than 20 employees and just four officers, they believed they were too small an outfit for coverage and that even if they did look for it, the policy would be too expensive. Fortunately, they contacted a professional insurance agent, who found company directors liability coverage from a top-rated insurer for less than $2,000 annually. The move proved to be perfect timing, as a claim was filed against one of the senior officers alleging wrongful termination just months after the coverage was purchased.


If your firm lacks this important protection, don’t hesitate to call an agent today to obtain a free quote for this and other very necessary business protection.