When working with Boards we’re often asked, “Do I really need D&O insurance?”
Quick answer: absolutely.
Long answer: yes, but even if you have D&O insurance, your butt is not covered – it’s not enough.
Wait…what is D&O insurance?
Directors and Officers Liability Insurance reimburses losses related to legal action brought against Board Directors or company Officers for alleged wrongful actions and decisions made while conducting their duties as Directors or Officers.
In other words, if you’ve made a mistake while doing your job, and that mistake ends in legal action, D&O Insurance may help cover some of the legal costs and penalties.
But what if you don’t have D&O insurance? You guessed it…
you can be personally liable for the expenses related to legal action taken against you (both your defense costs and any legal rulings). With the ever-increasing amount of litigation, increasing related losses, increased regulatory oversight, and an ever more complex legal system you do not want to be in this hot seat.
So, what do you do?
Quick answer: make sure your company or organization has D&O insurance that covers your specific needs. These can vary depending on the size of the organization, the complexity of the products, services, and programs offered, and who the company or organization serves. Ask some questions, and if necessary, get this topic on the agenda of your next board meeting. You’ll be glad you did.
But, the full answer is more complicated than that.
Long Answer: Directors and Officers Insurance isn’t enough. If something goes wrong, by the time liability insurance takes effect, you will have already gone through LOTS of struggle, anxiety, and frustration.
If you’re walking the high wire, it’s all well and good to have a safety net, but your number one objective is to not fall in the first place.
If D&O Insurance isn’t enough, what is?
So glad you asked. Here’s the hit list.
You need to make sure that you:
- truly understand your role as a Board Member
- carry out your role accordingly, and
- conduct your role in a Duly Diligent manner.
Doing these things well is your best defence against personal liability.
This may leave you feeling a bit exposed, or wondering how the heck you’re supposed to actually DO this stuff. Don’t worry. We’re here to help.