Small business owners face many liability risks. It is essential to understand the risks most prevalent in your industry. Directors and officers liability, also known as D&O, can arise if a client or customer seeks litigation for a decision made by your executive management team.
Examples of D&O Claims
There are many reasons your staff may be sued by a client. Let’s take a look at some of the most common D&O claims.
- Misrepresentation – If a client discovers that one of your executives misrepresented your company’s assets or capabilities, which, in turn, caused the client financial harm, that client may seek legal counsel.
- Breach of Duty – If shoddy work has been performed by a contractor and your company fails to take action to remedy the situation, a client may file a claim.
- Theft of Proprietary Information – If an executive leaves your company on bad terms and wants to retaliate, he or she may steal a client’s proprietary information and give it to a competitor. This could result in serious litigation against your company, even if you have done nothing wrong.
Steps To Reduce Risks
Make sure all your executive team members understand the risks they face through their decisions. You should also speak with your insurance agent about D&O insurance that can protect you from costly litigation.
Stay vigilant to reduce your risk of liability claims.