Corporate Officers Liablility

Liability is a word that is commonly misinterpreted today; too many people think that it means 'if anything goes wrong, it is always someone else's fault!' The actual definition of the word liability is "something for which one is liable; an obligation, responsibility, or debt."

When this definition is applied to insurance, especially officers liability (and directors liability as well), it means that the company has promised to make good any problems arising from their directors or officers failure to act in a responsible manner in the discharge of their duties.

Companies purchase liability policies that cover their employees, officers and directors in the operation of an auto or other equipment necessary for the employee to do their job adequately. Coverage will vary depending on the nature of the policy and the company's prior loss history.

An example of liability coverage might be, say, an operator who owns a garage (or what used to be known as a service station), and also operates a tow truck as part of the business. The tow truck operator has an accident - or damages the vehicle he is towing - and the coverages contained in the liability policy will compensate the other party for any losses they may have incurred.

Professional liability covers such occupations as nursing. A nurse working for a hospital would be covered under a malpractice liability policy, as would lab technicians, doctors, etcetera. The hospital is required to provide adequate oversight and supervision of all those who work in that facility and can be held liable in the event that such oversight is not done.

Do not be fooled into thinking that liability insurance means that the directors and officers of a company are not responsible for their actions and the consequences; not at all. Rather, directors and officers liability policies cover errors and omissions - the failure to do their job properly.

Finally, what insurance boils down to is this: the company will sell its product or provide its services, but in the event of problems or damages, directors and officers liability insurance will cover the cost of any errors and omissions.