By Catherine Rioux, Director, Training and Consulting Services
Guest blogger: Lucien Bergeron, Trainer

For this blog, I have decided to provide a forum for an esteemed and respected trainer. Lucien Bergeron will be discussing the importance of civil liability insurance for directors and officers. Enjoy!

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In the following article, we will take a look at two specific reasons why this D&O coverage SHOULD be offered to all your clients.

Businesses of all sizes need this coverage

Like other forms of civil liability insurance, D&O insurance covers policyholders in the event of potential damages caused to third parties when companies are at fault. In this case, however, we are referring very specifically to actions or omissions by company directors or officers in the course of their duties that result in damages to third parties. Their fiduciary role lies at the heart of this matter.

Needless to say, shareholders may have suffered damages, that is, if the company has shareholders of its own. However, damages may also involve clients, employees, volunteers and members of various groups, etc. There is a wide range of possibilities, all of which may entail legal fees that can add up very quickly. If liability is confirmed, financial compensation may have to be paid.

Examples

• An employee is fired and sues management for wrongful dismissal.
• Another employee takes legal action based on psychological harassment allegations.
• A volunteer sues the company's directors for sexual harassment.
• Management does not file reports on a timely basis as required by a regulatory authority. As a result, the company's operations are suspended, leading to lost profits and a temporary closure. Shareholders or employees sue management for negligence.
• An employee takes legal action based on allegations that the HR department gave him wrong advice on his pension fund, leading to a loss of several thousand dollars.
• The company is in serious financial difficulty and cannot pay for the employees' vacation time; as a result, the employees sue the directors.

Directors and officers may be held personally liable

The vast majority of directors and officers rely on the fact that virtually all companies have specific rules stating that they will provide compensation if their directors or officers are required to pay damages in the course of their duties.

We often forget one eventuality: what happens if a company goes bankrupt? In that light, the following consideration is very important: directors and officers may be held personally liable for any amounts (damages) payable. If the company is unable to reimburse them, they may have to dip into their own pockets to make payment.  

Examples

• A company files for bankruptcy even though the employees have not received their holiday pay. The directors are then required to compensate the employees.
• Legal action is taken against various directors for sexual harassment. At virtually the same time, the company goes bankrupt and is unable to reimburse the directors.

IMPORTANT NOTE: Non-profit organizations also need D&O coverage as some of the above examples may also apply to them.

Conclusion

The RCCAQ offers relevant training in this area. Participants will learn all about the following topics:

• The types of coverage generally available.
• The market players based on the type of risk.
• The notion of coverage based on "claims made" and the distinction between "loss" and "claim".
• Coverage extension possibilities.
• Various other topics.

D&O training is straightforward and each session runs for only two hours. This could be a great investment!

Sign up for the training session entitled D&O civil liability made easy