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Why Directors And Officers In Companies Are Sued?

Running a business is not easy. You’re constantly exposed to risks of getting sued. And sometimes the legal liabilities can threat the directors and officers at the company as well. To shield such lawsuits, which might come not just from the customers but also other stakeholders like employees, directors & officers liability policy is a must-have.

directors & officers liability policy

So, if you have a board of directors and officers, you should ideally have D&O insurance policy. If not, here are some of the common reasons they might get sued for:

  1. Discrimination at the workplace - It’s not uncommon for employees to level allegations against employers for discrimination. They may sue the directors and officers for that. D&O insurance policy can take off the burden of pursuing the legal course there.
  2. Poor product or service - It’s not possible to woo ever customer with your product. There would always be a few of them who may have complaints against your offerings. Some of them may decide to sue the directors and officers for the poor quality product or service. D&O insurance policy can come to aid here.
  3. Anti-competitive behavior - The competitors may decide to sue other company’s directors and officers for adopting anti-competitive measures and behavior that’s affecting their business. Such claims can be quite costly.
  4. Incompliance with workplace laws - This can come from employees or any third-party that champions workplace or labor laws. For instance, if one is not paying the workers properly, if they are making them over-work – these instances can call in for lawsuits against the directors and officers of the company.
  5. Misuse of company’s funds - Other investors in the same company can make such claims. It can lead to a long legal battle, which can turn up to be costly.

There are many other reasons why relevant stakeholders can decide to level legal claims against directors and officers in the company. Investigations by regulators are another thing to look out for, which can hold directors and officers liable for, leaving them to defend themselves in the court of law. Defending such legal actions can be expensive. This is something critical especially for SMEs and startups who don’t have the financial backing like that of Fortune 5000s.

So, do consider getting a directors & officers liability policy. It can make the biggest different into ensuring the key people in your company are protected and that your business has the right support to grow on.

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