D&O Liability Insurance

What is insurance, really? The bottom-line definition is anything that is a guarantee against loss or harm. In the world of business, insurance means that, in the event of a loss, the company has the means to recoup all or part of that loss by the payment of insurance premiums. Of course, the company will have directors and officers - and should also have D&O liability insurance against any corporate malfeasance.

In the event of a lawsuit, even a small business must carry some degree of liability insurance. It simply is a sound business practice in today's litigious climate. Even non-profit organizations are at risk of being sued. Liability insurance doesn't imply that there will be wrongdoing by anyone, simply that, in the event of a lawsuit, there is a fund available to make payment.

An example of this could be a company that is tasked with the responsibility of preventing any environmental damage as a result of their operations. Let's say that, because of negligence on the part of one or more officers, damage does result. The product that the insurance company offers is the assurance that this damage will be compensated, whether large or small.

Business must operate pragmatically - in other words, with the hope that no wrongdoing will be done, but in the event that wrongdoing does take place, the insurance policy will cover the costs.

An example might be a concert, at which liquor is served - or perhaps a wedding. The company that is catering the event should have liability coverage in case of anything untoward taking place - food poisoning, damage caused by an intoxicated patron or guest, just to name a couple of possibilities. The coverages contained within the liability insurance policy should cover all but the most arcane contingencies.

In the present business climate, of course, the 'insurance' that immediately springs to mind would be that of simply not allowing liquor of any sort to be served at a venue, whether it be a wedding, concert or any other type of public event.

Commercial insurance - that which covers the cost of doing business - would also include what is commonly called "D&O liability insurance" or directors and officers liability insurance. The hope, of course, is that the policy is never called upon to cover such a liability.