An Introduction to D&O Insurance in Toronto
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As the heart of Canada’s financial sector beats mainly in its largest city, Toronto also produces innovators across all sectors of industry. With a vast and expanding economy and one of North America’s largest markets, most of the world’s leading companies maintain a presence somewhere in the Greater Toronto Area, adding to its reputation as a world-class city. It is also home to countless start-ups and disruptors emerging from, and driving, the new economy. This is an exciting time to live in this bustling city and to be a part of its commerce.
For companies doing business in Toronto, it is important to be aware of all the risks that are present as well. At ALIGNED, we pride ourselves in our expertise at helping companies successfully navigate all the risks that companies of every size face. In this article, we focus on directors and officers of public, private, and non-profit companies, and the liability they are exposed to. We will also show how directors and officers insurance policy (D&O Insurance) protects a company’s executives and why it should be a part of your company’s risk management portfolio.
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What is Directors and Officers Insurance?
As directors and officers of companies may be personally liable for decisions they make when heading a company, they are exposed to considerable risk. Directors and officers insurance (D&O insurance) is expressly designed to provide coverage for the actions and decisions of a company’s board members and officers – past, present, and future. Those actions can include misrepresentations, neglect of duty, and errors made by a company’s directors and officers.
If any of the actions specified in the D&O policy results in a legal claim for damages, the policy kicks in and reimburses the costs of the insured director, officer, or company. We explain in further detail below what a D&O policy covers. For now, it’s important to note that directors and officers insurance is not the same as commercial general liability insurance (CGL) as a general liability policy is a different product meant to protect a company against claims of physical harm to person or property.
What does a D&O Insurance Policy Cover?
As alluded to above, directors and officers insurance will generally compensate a company or an individual board member or officer for the legal costs associated with allegations of:
- Mismanagement of the company
- Human resources violations
- Bad strategic decisions
- Failure in fiduciary duties
Those costs can include:
Lawyers’ fees – for both legal actions and investigations.
Statements of Claim – if a judgement is awarded or a settlement is negotiated.
Is D&O Insurance Necessary?
Basically…Yes. In order to recruit and retain top talent, companies that want to remain competitive should have a directors and officers insurance policy in place to show its potential leaders its commitment to their security.
Why Choose ALIGNED
At ALIGNED, we are completely transparent about what is covered in each of the corporate insurance policies we recommend and work to fill any gaps in coverage to ensure that your company is covered under all circumstances.
Call ALIGNED Insurance today for all your directors and officers insurance needs.