Directors and officers of an organization get tasks for complex responsibilities of managing the organization and performing at its best level. However, during the job course, directors and officers might make mistakes that lead the business as well as its stakeholders toward a loss. For such losses faced by the business and other interested parties, the directors and officers can be sued. The legal defense costs are high for such lawsuits and might cause a financial strain for the directors and officers. This is where a D&O Liability Policy comes into the picture. The policy covers the liabilities faced by the directors and officers of a company in case of any wrongful acts during the course of their job. The policy pays the defense costs incurred by the directors and officers in defending themselves from litigators. So, what are the advantages of having a D&O policy over not having a policy?
Advantages of having a D&O policy
There are various advantages of having a D&O policy compared to not having one. These include the following :
Mistakes made by Directors and officers can be common and often costly
The chances of directors and officers committing mistakes when discharging their duties are quite high. They might knowingly or unknowingly take a wrong decision that would land them in legal trouble. If the aggrieved party sued them, which is fairly common in the corporate sector, they would incur huge legal costs in defending themselves. These costs could threaten to wipe out their life earnings and so a directors’ and officers’ liability policy becomes essential. By covering the liability of the directors and officers, the policy provides them with financial relief.
Offers peace of mind
The best advantage of having a D&O policy is the peace of mind that the policy provides. The directors and officers are confident of the policy coming to their rescue in case of any legal issues relating to their duties. They can, therefore, work efficiently without worrying about the financial repercussions of their mistakes. Moreover, since the policy would cover their legal representation costs, the directors and officers also have the peace of mind of knowing that any job-related mistakes would not threaten their personal financial position.
Boosts employee morale
Directors and officers of a company that invested in a D&O policy often have more motivation, compared to a company that does not have the coverage. They know it would protect them in case of any lawsuits and so it boosts morale and makes employees trust their companies more.
When hiring directors and officers if the organization has a Directors & Officers Liability Policy in place, prospective talented candidates would be more open to joining the company. The candidate would see that the company protects the personal financial liability of its directors and officers. The policy, therefore, would help organizations attract a more efficient workforce for making the business more productive.
Besides these advantages, directors’ & officers’ policy is also inexpensive and can be easily bought. So, invest in a D & O policy for your organization and protect your employees against legal liabilities.