Thursday , April 18 2024

The Importance of Hiring an Indemnity Insurance Broker

In today’s legal environment, directors and officers of professional service firms have many legal responsibilities to investors, creditors, shareholders, client companies and employees for every management decision they make. These decisions include contract disputes, financial performance, hiring and firing, benefits plans, corporate policies, sexual harassment and discrimination, just to name a few. Mismanagement or breach of any of these can incur personal liability to the officer or director involved, as well as the firm itself.

A directors indemnity insurance protects you and your firm against claims of alleged financial loss as a result of mismanagement of the company. Purchasing a directors indemnity insurance can be quite complicated if you’re ill-informed, so it’s best you hire an experienced broker for professional advice. Otherwise, you risk putting your company’s officers and directors at risk, regardless of how big or small your business is.

Furthermore, a broker will work with you and do their best to secure the best claim outcome possible with their extensive negotiating skills and product knowledge. And most importantly, you’ll have a dedicated account management that will be there for you for all claims and inquiries.

A lot of times, it is thought that the directors’ and officers’ liability is a coverage which is only necessary for publicly traded businesses, but that’s simply not true. Private companies still face the same risks. Business decisions by directors can impact the operations and finances of any company, and the cost of defending a corporate lawsuit is quite high. Plus, penalties and fines are steadily increasing, sometimes even exceeding the net worth of small private companies.

A liability insurance can provide cover for: defence costs, judgments, settlements, damages, adverse costs orders, public relations expenses, bail bond expenses, prosecution costs, investigation costs, extradition costs, deprivation of assets expenses, pecuniary penalties and court attendance costs. With all of these threats, the need of an effective and immediate response is evident.

Many board members won’t accept any management positions without knowing they have this protection, and a director’s and officer’s indemnity coverage protects the business’ balance sheet when the need to defend an individual officer or director arises.