Directors & Officers Insurance

You need Directors and Officers Liability insurance when you assemble a board of directors. They will frequently make the requirement.

Investors, especially Venture Capitalists, will also usually require that you show evidence of Directors & Officers Liability insurance as part of the conditions of funding your company.

Also having employees opens management up to employment practices lawsuits – which usually can be covered under D & O insurance.

First, you need Directors & Officers Insurance because claims from stockholders, employees, and clients will be made against the company, AND against the directors of the company. Since a director can be held personally responsible for acts of the company, most directors and officers will demand to be protected rather than put their personal assets at stake.

Secondly, you need Directors and Officers Insurance because investors and members of your board of directors will not be willing to risk their personal assets to serve as a corporate director or officer, no matter how heartfelt their belief in your company.

Lastly, employment practices suits constitute the single largest area of claim activity under D&O policies. Over 50% of D&O claims are employment practices.

D&O insurance would cover a number of legal actions, including:

• Breach of fiduciary duty resulting in financial losses
• Misrepresentation of company assets
• Misuse of company funds
• Fraud
• Failure to comply with workplace laws
• Theft of intellectual property
• Lack of corporate governance.