Piercing the Corporate Veil and why your Organization needs D&O liability coverage
- Posted on Tuesday, September 16, 2014
Usually, an organization is treated as a separate legal entity, and its directors and/or officers shareholders would not be directly financially responsible for its trials and tribulations. However, if an organization is found grossly mismanaged, then a legal decision could be made to “pierce” or “lift” the “corporate veil”, rendering an organization’s directors and/or officers potentially liable to pay personally for financial damages. This is where Directors & Officers (or simply D&O) liability insurance comes in.
A D&O Insurance policy may cover an organization’s directors and officers in the event of a claim due to (including, but not limited to) a breach of legal duty, mixing of personal and business assets, or failing to disclose conflicts of interest. Intentional criminal acts and/or fraud and other certain acts as defined by the policy would be excluded from coverage.
With that, purchasing a D&O Insurance policy can make an organization more attractive to potential directors and officers. This type of policy provides peace of mind to the directors and officers. It lets them continue to make effective business decisions without the fear of being personally responsible for financial damages to the company.
Not all D&O insurance policies are the same, and it’s important to make sure the policy fits the organization. We have access to a variety of D&O markets and can find the policy that best covers the organization at the best price. Give us a call. We can help.