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HUB International Professional & Financial Risk Insurance
HUB International is Canada’s leading solution provider for certified professionals, executives and the companies they work for.
Our Professional & Financial Risk specialists at HUB International Insurance Brokers deliver the combined power of our vast global resources and solid local relationships. Whatever field or sector you operate in, you receive the solution that makes the most sense for you, your practice and your business.

Directors & Officers Liability

Our Western Canadian Directors & Officers liability insurance team helps public, private and non-profit organizations protect their leadership teams from a growing list of potential liabilities as the business environment continues to change. 

Directors and officers face a range of legal exposures due to the fiduciary duty they owe their corporations. Ultimately, the personal assets of directors and officers are at risk if claims are brought against them for allegations of wrongful conduct in their capacity as company executives. 

As such, it is imperative that a comprehensive D&O policy is established to provide such executives with financial protection. We currently insure and advise over 200 Boards of Directors.

1.1 Public

In the aftermath of the credit crisis, enforcement of securities laws has become a top priority. Regulatory bodies seek to regain the public’s confidence and companies with public securities face increased scrutiny. In addition to reporting and disclosure obligations, public companies are exposed to shareholder activism, ongoing legislative reform, as well as investigation and enforcement actions. Directors and officers are entrusted with the overall management of a corporation and D&O insurance is designed to provide financial protection for the directors and officers in the event that lawsuits are brought against them alleging wrongful conduct in the course of their service. A D&O policy further protects the balance sheet of a company from costs incurred in defending and settling securities litigation against the corporate entity.

1.2 Private

A common misconception is that only large, publicly-traded companies should be interested in securing D&O coverage because of the responsibilities their directors and officers have to shareholders and due to the close scrutiny to which they are held by the Securities Regulators. However, the reality of today's corporate legal climate suggests smaller, privately held companies are equally vulnerable to litigation. In fact, employee-related litigation represents the vast majority of D&O related claims.

Additional considerations underlining the importance of D&O protection include the fact that directors and officers of privately held companies often work in more demanding environments than their larger, public counterparts. They may try to cover more corporate bases, unique conflicts of interest may exist and their activities may be conducted under less efficacious conditions.

Moreover, the applicable standards of conduct are identical to those to which directors and officers of public corporations are held. In the event of a claim, the costs of defending corporately targeted lawsuits may exceed the net worth of most of a company's directors and officers. Judgments can be financially crippling.

The bottom line is a small to medium size company may have difficulty attracting qualified individuals to its board without robust management liability coverage.

1.3 Not-for-Profits

The duties of non-profit directors and officers are much the same as, if not more stringent than, those that are imposed on management of for-profit corporations.  Charitable organizations that solicit public donations are considered to be trustees of their property, and thus, the duties are more onerous and the liabilities are greater than those of ordinary non-profit board members.

Directors’ powers vary according to the bylaws of each organization and the applicable governing statutes whether federal, provincial or territorial. Directors and officers of non-profit organizations are generally subject to the same common law liabilities imposed on management of commercial corporations.  For example, the common law holds directors and officers liable for breach of fiduciary duty, breach of trust and negligence.

Similarly, non-profit directors may face many of the same statutory liabilities applicable when serving commercial corporations. These liabilities may relate to employment, environmental, and financial reporting law, as well as under the withholding provisions of taxation law.

Potential claimants include employees, volunteers, members, beneficiaries, government agencies, and donors.

1.4 Multinational

Although D&O policies issued in a company’s home country will typically provide worldwide coverage, enterprises with subsidiaries in foreign countries -- or those with securities traded on foreign exchanges -- should consider local D&O policies.

Multinational companies can implement an insurance program that combines worldwide coverage through a master policy with policies issued by locally licensed insurers in select countries.  These arrangements often best position a company to respond to unexpected circumstances resulting in D&O claims brought in foreign jurisdictions and may remove significant tax liabilities. Moreover, local policies may be required by insurance regulations in many countries. In the absence of a locally-admitted policy, an insured may be barred from receiving insurance claims payments in the country where the loss was incurred.

Legal compliance aside, local policies may also have the advantage of being tailored to a jurisdiction’s particular standards, exposures and business practices. Further, a global program provides the benefit of local claims managers who are more experienced with the country-specific legal system and litigation practices.

Every multinational organization should assess its specific circumstances and strategize an appropriate D&O coverage program reflective of its exposures, risk tolerance and financial objectives, while addressing the concerns of the board members and executives at home and abroad.

 

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