Running a company is not an easy task. You have to deal with different kinds of situations every day. Employees are the most important asset of a company. They make sure that the daily workforce stays intact. These employees are managed by their team leaders and managers. As you start going up in the hierarchy, the officers, directors, board members are the ones that take important decisions for the welfare of the company and its employees.
Sometimes, decisions taken by them backfire and they have to face some legal actions against them. This is where the role of the D&O insurance policy begins. This insurance policy is designed to cover the allegations against the managers, directors, board members, etc. for any kind of misconduct. Director & officers insurance policy is a liability insurance policy that protects financially.
Now that you know that who is covered under this insurance policy, let us tell you if your company or business requires a D&O insurance policy.
There is a misconception among the buyers that this policy is mostly required in the company or business that deals with the public, directly or indirectly. But this is not it. Any company that has managers, board members, board of director, advisory committee, they should consider purchasing this policy.
It is not mandatory for a company to have multi-million dollar revenue to attract lawsuit against managers or board members for misconduct that has affected anyone physically or financially. Even the small companies with fewer employees and managers need to protect themselves as much as the big companies do. Well, small companies must get this policy because the revenue of the small company is not as high as the revenue of the big company.
Let me give you an example, Aman opened a restaurant in 2015 in Cannaught Place, New Delhi. The restaurant has been running smoothly and growing as the food was really tasty and people have to book a table before arriving at the restaurant. Since Cannaught Place in New Delhi is a world-famous market, foreign tourists make sure to visit this marketplace.
One day a couple from the USA visited Connaught Place in Delhi. Since the market is huge and people get tired of walking and get hungry they decided to eat at Aman’s restaurant. They got a table and order some Indian dishes. However, it was not a good day for Aman and his chef. When they started eating, a small piece of glass came into the mouth of the foreign guy tourist and cut a little bit of his mouth from inside. That is where Aman realized that it is not going to go away easily. The couple decided to sue the chef and the owner Aman for being careless while cooking and serving the food that made the foreign tourist guy bleed from the mouth.
It was not Aman’s good day but he was lucky because he already had a D&O insurance policy that provided him cover for the legal fees and financial settlement with the foreign tourist couple. In case he was not covered with this policy then he would have to pay for all of it out of his pocket.
Officers, managers, directors of the company get sued by the employees, investors, customers, vendors, etc. for wrongdoings in managing the business. This insurance provides financial cover for standard indemnification provision.
There are several things that the managers, directors, and officers get sued for. That includes:
Purchasing a D&O insurance policy can save your company or business from financial burden. All the reasons mentioned above like fraud, stealing intellectual property, etc. insurance companies will provide financial cover to the directors and officers in legal procedures as well as a fee of the lawyer who would defend the person in the court.
Apart from legal cost coverage, the insurance policy would attract potential investors as they would feel safer working for the company that provides insurance in case they get sued. And not just investors it will attract better talents for high positions in the company where they can feel financially safe.
Wrapping It Up
It does not matter how big or small your business or company is. You never know when a person would come up and sue you for any wrongdoing as well as frame you for doing something that you haven’t. If the company provides a D&O insurance policy then the insurance company will make sure that directors & officers of the company get financial aid during any legal proceedings. It is also advised to purchase the policy online instead of offline. Purchasing the policy online is cost-effective and you can learn about the plan thoroughly.
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