As Thanksgiving approaches, many people will celebrate the holiday by giving back to their community. Volunteering time or services to a company or non-profit organization may be a selfless act of generosity, but these acts of goodwill can also expose volunteers to possible lawsuits if they are making decisions on behalf of the organizations or company. Fortunately, there is a way to mitigate the exposure to lawsuits and continue lending a hand.
A directors and officers (D&O) insurance policy protects directors and officers from liability risks associated with working or volunteering on the board of an organization or company. These risks can include negligent acts or omissions, antitrust violations, wrongful termination, libel and slander, and misleading statements that result in a lawsuit against the company. Whether you’re working or volunteering as a director or officer, it’s important to make sure you’re protected from these risks with a D&O policy.
Directors and officers can be sued by the company or organization they work or volunteer for or by other current or former directors and officers, employees, shareholders, investors, lenders, vendors, customers, competitors, various government officials, such as state attorney generals, the IRS and state and federal labor departments, consumer groups and numerous other third parties.
While the entities that can sue a board member are numerous, the situations in which lawsuits can be filed are limitless. Here are just a few examples of real D&O claims from the Independent Insurance Agents & Brokers of America:
There are several types of D&O insurance that can protect individuals from these situations. These coverages include corporate reimbursement coverage, which protects directors and officers of a company or organization; side-A coverage for directors and officers who are not indemnified by a firm; and entity coverage for protection against claims made against a company.
D&O policies can also be written to include coverage for employment practices liability for protection against lawsuits for wrongfully terminating an employee or sexual harassment.
Before you start working or volunteering in a director or officer capacity, you should check with the company or organization to make sure it has a D&O insurance policy in place. If you’re serving on a board and you’re unsure about whether you’re protected, Jon Jepsen at SentryWest Insurance (a Trusted Choice® independent insurance agent) can answer any questions you have about coverage and risk exposure.
Jonny Jepsen, CIC