Directors and officers insurance (also known as D&O Insurance) is a form of business insurance that provides coverage for company executives and directors against wrongful acts up to the coverage limits. It covers your highest-ranking employees, such as your board of directors. These wrongful acts might include actual or alleged errors, omissions, misleading statements, and neglect or breach of duty on the part of a board of directors member.

The D&O insurance policy will provide the resources and expertise to defend the board and individual members against the allegation. Defence costs are sometimes included as part of the overall policy limit, in addition to protecting against fees and fines one could face, so knowing the total limit is essential. Note that this protection is provided whether the individual director in question is being sued or the company is the one under fire.

All non-profit and private companies should have directors and officers insurance if they have a board of directors to protect their board members, directors, and officers from financial losses. It might not seem like directors and officers face many liability risks, but this practice faces a deceptive amount of risk. The laws that companies must follow regarding taxes, payments, treatment of employees, for-profit motif for shareholders, duties to clients, and more can be very strict. Furthermore, breaking these laws has very harsh penalties for the company to face, even if only a single mistake is made. Often, D&O insurance is the only line of defence a company has after a mistake is made, meaning that it is recommended for any business with people in such positions, regardless of size. Individual board members can be held personally liable for their actions while acting on a board of directors. To keep them protected they need to have D&O insurance.

Although directors and officers insurance is not legally mandatory in Ontario, it is recommended for every company in Ontario that has people in these positions. This recommendation is due to the vast number of perils faced by directors and officers in their positions. Also, many of the most talented people in the industry won't work for companies that do not protect their top employees with D&O coverage since this protection gives them peace of mind that they will be financially safe. A company which also does not protect itself with directors and officers insurance is very vulnerable to lawsuits and other dangers, potentially costing it massive amounts of money and disrupting the business.

Although there are many times when directors and officers insurance protects you, it doesn’t cover everything. Some of the times that D&O insurance won't cover a loss are below.

Illegal Acts: If you purposefully mistreat employees, or falsify documents, D&O insurance won’t cover you.

Intentional Mismanagement: Intentionally circumventing your fiduciary duties to your shareholders will not be covered by directors and officers insurance.

Acts Committed For Personal Gain: High-ranking employees have the power to make critical decisions. To get the benefits of D&O insurance, they must choose the option that will benefit the employer, and not themselves.

Yes. Directors and officers insurance can be applied to a non-profit insurance policy. It is often recommended that non-profits do their best to protect their board members, as many of them are volunteers and will likely be hesitant to take on the responsibilities involved in being a board member if they are open to the massive risks involved with not having D&O insurance. If you would like to know about how your directors and officers insurance is impacted by your organization being a non-profit, it is best that you speak with your Morison Insurance broker, who will be happy to help you.

Yes, D&O insurance can cover past directors and officers. As long as said members were protected by directors and officers insurance while on your board, they will remain protected for actions they took while performing their duties as long as your company retains its D&O insurance policy.