Directors, Officers, and Employers: Are You Liable?
In our previous post, we asked this question:
When determining an adequate coverage limit for your insurance policy, what is the difference between the replacement cost and the actual cash value?
The only difference here is depreciation. If your building or structure is brand new, there will be no difference between the two.
Did you know the answer?
Now for this post’s question!
True or False: Employment Practices Liability insurance only protects employers against claims made by past and present employees.
Check back for the answer in our next post!
You work hard to do the best by your business. You think critically about all the decisions you make, and consider carefully what will be the best possible action for your managers, employees, and clients. It’s not always easy to make the hard choices, but someone has to do it—after all, business can’t truly progress without change and tough decisions.
Unfortunately, not everyone will be thrilled by the choices you make—and believe it or not, as a board member or officer of an organization, you can actually be sued for making what you believe to be the correct decisions for your organization.
If this happens, your general liability policy will not, in fact, cover your liability in this area. Any management decision concerning the safety of the workplace does not fall under this umbrella. Rather, your general liability policy only responds to claims of bodily injury or property damage of others.
Is your investor unhappy? They can sue. What about a government regulator? Or worse, a competitor? They have the legal right to sue board members and officers over their decisions or actions.
The good news is, you can protect yourself! Many insurance providers offer Directors’ and Officers’ Liability coverage that respond to a variety of issues that may arise. These issues may be related to:
•Allegations of misrepresentation, material omission, or false claims in financial statements.
•Allegations of deceptive or false advertising and/or marketing.
•Employment practices: Workplace harassment, termination without cause, failure to pay pages, or discrimination.
•Failure to deduct, withhold, or remit required financial amounts (ie. Income Tax, HST, etc.).
•Failure to make pension benefits contributions, such as: misrepresented risks, permission of excessive fees and expenses charged, inappropriate investment options, and so forth.
While we’d all like to think that this kind of thing will never happen to us, there’s no guarantee either way. A Directors’ and Officers’ Liability policy can be a highly valuable benefit in the event that you are accused of any of the above, or other groundless or frivolous claims. Rather than waste the company’s assets on the case, it can be an enormous relief to have the defense costs taken care of with a liability policy.
But what if you’re a business owner, and not necessarily someone functioning as a Director or Officer of a business? You’re subject to the same type of risk, but require coverage under a different term. Employment Practices Liability (EPL) provides coverage that you as a business owner can purchase to protect your organization.
EPL protects you against the same type of lawsuits based around accusations as listed above:
•Breach of contract
•…and so forth
Claims from employees regarding these types of issues have only increased under the introduction of Bill 107, and the average cost of an EPL lawsuit is around $60,000. Is that something your business can survive?
This coverage, as with the Directors’ and Officers’ Liability Coverage, is separate from your General Liability Coverage. Under Bill 168, all employers are now required to prepare policies in regards to workplace harassment & violence, and to review these at a minimum of once per year.
Operating without a safety net in this area could expose your company to risk that you may not be able to afford. When it comes to liability, regardless of whether you’re a business owner, manager, director, or officer, don’t risk free-falling when a lawsuit or allegation comes your way. Protect yourself and your company or business’s future with adequate and proper liability insurance.