Directors Insurance For TSX Listed Companies – Options For TSX Listed Companies
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In today’s business climate of corporate transparency and accountability, directors and officers face a myriad of employment-related exposures. In the past few years, we’ve experienced an unprecedented number of corporate scandals and have seen directors and officers increasingly held accountable for their actions. Management decisions made by boards of privately held TSX listed companies may well result in unexpected litigation.
Regardless of your company’s size, the legal costs associated with a lawsuit can be crippling. If your company does not insure this risk, qualified directors and officers may hesitate to join your team for fear of personal liability in the event of an error. To help recruit strong leaders as well as ensure the well-being of existing leaders and your company, a directors and officers liability insurance (D&O) policy should be part of your comprehensive risk financing strategy.
How Directors Insurance For TSX Listed Companies Fills the Coverage Gap
Unlike a commercial general liability policy that provides coverage for claims arising from property damage and bodily injury, a D&O policy specifically provides coverage for a “wrongful act,” such as an actual or alleged error, omission, misleading statement, neglect or breach of duty.
For example, a manufacturer told one of its suppliers to increase inventory because they were expecting a large increase in production. As predicted, demand for the manufacturer’s product grew, but the manufacturer increased its inventory with another vendor. The original supplier successfully sued the manufacturer, alleging they suffered damages as a result of having relied on the manufacturer’s promise.
A D&O policy provides defence costs and indemnity coverage to the entity listed on the policy declarations, which may include:
- Coverage for individual directors and officers
- Reimbursement to the organization for a contractual obligation to indemnify directors and officers that serve on the board, and
- Protection for the organization or entity itself
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Sources: Adapted from Coverage Insights © 2011-13 Zywave, Inc. All rights reserved. This Coverage Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.