Many small and medium-sized enterprise (SME) owners think that they do not need Directors & Officers (D&O) insurance as it’s more relevant to large multi-national companies. However D&O insurance is just as important to SME’s as it is to larger companies.
This type of insurance is designed to protect a business owner/manager and their personal assets against claims they may be personally liable for.
Whilst the senior management and executives in your SME may make honourable decisions and actions, mistakes can happen, even with the best of intentions. D&O can provide cover for the cost of investigating/defending an allegation, the peace of mind knowing that you are insured against legal costs as well as the penalties or damages that may result from a claim or investigation.
What is covered with D&O Insurance?
Typical claims include but are not limited to HR and employment issues, breach of contract, decisions that exceed authority, misrepresentation, inaccurate reporting, regulatory and legal non-compliance.
As a matter of course, directors, managers and officers usually make these type of decisions on a daily basis, so it pays to ensure that they are fully covered in the event that any regulatory or legal claims or investigations are made against them.
What isn’t covered with D&O Insurance?
If actions or decisions are taken by a director, manager or officer that are intentionally fraudulent and criminal, then these claims will not be covered by your D&O policies. This is because knowingly committing an offence is criminal and this type of activity cannot be insured!
Having said this, if a director, manager or officer of your SME was intentionally non-compliant or committed a fraudulent act, then those who were unaware would be protected against these claims, whilst the offending employee would not (assuming that you are innocent of course!).
Is D&O Insurance right for your SME?
If you are not sure whether this type of insurance is suitable for your business, it’s best to talk to a specialist who can help you to make the right decision for your situation. Just because you have complete faith in your senior management and executives, doesn’t mean that something won’t happen resulting in a claim.
These claims may be proven or not, but even if innocent, it can cost hundreds of thousands of dollars to mount a legal defence in a court of law, which is not refundable if the case is unproven!
To decide whether Directors & Officers Insurance is suitable for your business, talk to an insurance specialist today.