Directors and Officers Insurance - What You Need To Know
If you are considering taking on the role of a directorship or officer of an organization, there are some things you must be aware of. Specifically, you need to know about liability and when you may be held accountable in lawsuits against the organization.
Duties Of Directors And Officers
Directors of an organization have a duty of due diligence. They must properly oversee the management of the organization that they are responsible for. For instance, they are required to act in good faith when completing work for the company or organization.
In short, as a Director, you will have three basic, principle duties. You will need to be loyal, diligent and obedient. You must always act in the best interest of the organization and uphold its specific bylaws. These are laws, rules and requirements within the organization. The interests of the company should always be put ahead of the interests of you as the Director.
When You Could Be Held Liable
If any of these three duties are not met, you could be held legally liable for issues within, or surrounding the organization. As such, it is important that you have specific insurance as the Director of an organization. There are also several other ways you could be held liable as the Director.
You may be held liable if you do not act as a statute states that you should. For instance, a statute may determine that Directors should keep an accurate account of any health and safety issues on the property. A logbook must be stored with all the information including the injured parties. If, as a Director, you fail to do this, you could be held liable. In this case, of course, the statute would commonly be important for health and safety officers in an organization.
A Director or Officer may also be held liable if they do not comply with the statutes of the company. This can include numerous issues within the business or organization. For instance, there may have been a case of wrongful dismissal in the organization. A Director may be held liable in the event that legal damages are claimed.
Are You Protected?
As Director, you also need to know that ignorance will not be accepted as a defence in these situations. You can not claim that you are not liable because you were not aware of the issue. As the Director of the organization, you should have been aware. You will not escape liability by resigning from your position. This is one of the many elements to consider prior to taking on the role of a Director. A company also may not be able to protect a Director through indemnity. You may still face a legal claim due to your actions within the organization. It is important that Directors and Officers are fully informed of their duties within the organization. If you are thinking about taking on this role, it is crucial you understand the legal issues. It's always beneficial to consult a lawyer to understand a full overview of the scope you will legally be responsible for if you choose to act within one of these roles and making sure you're properly insured is a must.
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