Directors are "jointly and severally liable" - the actions of one are the legal responsibility of all; consequently being a director/officer of a company can leave you at high personal risk since you can be accused by a company, shareholders, creditors or anyone that believes they suffered a loss as a result of a wrongful act or believed their fiduciary or contractual duties have been violated.
Directors and Officers Insurance covers losses due to wrongful acts committed by directors or officers
A Wrongful Act
Is any actual or supposed error, omission, misstatement, neglect, breach of duty or negligent act by any of the directors and officers (acting solely in their official capacity as a director).
Directors and officers
Are the persons legally responsible for managing the affairs of the company and through whom the company can legally act. “Officers” in addition to the directors will normally include “managers” who are managing the affairs of the company as a whole.
Claims can arise from
- Employees: actions for alleged wrongful termination of employment, discrimination, and sexual harassment.
- Customers, clients & consumer groups: actions where a director or officer is held personally liable in a similar manner to the company for a product liability.
- Competitors: actions for unproven breach of copyright & obvious breach Government bodies: actions in respect of the legal environment of a company. This would involve fraud, civil rights violations and licensing issues.
- Shareholders: actions arising out of mergers, takeovers, financial disclosure, acquisitions & divestitures.
