Running a business enterprise, especially a large corporation, requires making critical decisions and carrying out duties based on available knowledge. Directors and officers might make a mistake when performing their tasks, and mistakes could lead them into trouble. Liability lawsuits may follow in California courts. Directors and officers liability insurance provides some protections, but policy limits might be issues of concern for business owners.
Liability insurance that protects top managers
Whether serving on the board of a for-profit or non-profit enterprise, an officer or board member could become involved in wrongdoing or falsely accused of misconduct. A lawsuit might follow in either situation, and the officer could hope to rely on directors and officers liability coverage to protect his or her personal assets.
A civil judgment might not be the only thing an officer has to worry about as criminal charges could loom. An appropriate insurance policy may include coverage for criminal trial defense costs.
Policy limits exist, however. If the “D&O coverage” only covers a maximum of $1 million, a lawsuit for $1.5 million could leave the insured looking at substantial losses. Individuals interested in this type of insurance may find it wise to work with an attorney to review their potential liabilities and select an appropriate coverage amount.
Concerns for the insurance carrier
The insurance policy may present exclusions reflecting what the insurance carrier is not responsible for paying. However, the policyholder could argue about the language and attempt to sue the insurance company for payment. In some situations, a policyholder might have made misrepresentations to the company when procuring the policy. Such misrepresentations may lead to an invalid policy although the policyholder could challenge the insurance company in court.
Alternative dispute resolutions could address problems between the insurance company and the claimant. Perhaps an attorney might assist with disputes about payments and come to an agreement that both parties find acceptable. Sometimes, the policyholder might be wrong, and the insurance company has no obligation to pay. The provider may rely on an attorney to defend the claim denial.
Insurance law related to D&O coverage can be complex. Both insurance companies and policyholders may need appropriate representation to deal with disputes.