Every business likely has a hierarchy, and your insurance agency is no exception. Those at the top are usually responsible for big decisions that impact the business. However, with that power also comes a degree of responsibility and oversight.
Most officers have to see that a business functions properly. If they neglect their duties to do so, all sorts of problems could develop. Should mismanagement and neglect of duties cause financial problems, the agency could suffer. In certain cases, directors & officers (D&O) insurance can protect officers in case of claims of neglect of duties.
D&O Coverage for Neglect of Duties
If an officer does not ensure the business’ success, it could spell trouble. Let’s take a look at an example.
The agency’s owner might fail to enforce strict workplace confidentiality laws. For example, they might fail to stop an employee from stealing private client information. Failing to protect confidentiality could lead to problems for the client. This could be considered neglect of duties and might give the client grounds for a lawsuit against the agency. A successful claim might even financially ruin the agency.
This is where D&O protection can come in handy. It can help the agency cover the costs related to legal action or other penalties from neglect of duties. It might help you settle claims or compensate clients who sustained harm from alleged negligence.
Preventing Neglect of Duties in Your Business
Even if your agency has D&O protection, you still have to commit yourself to your business at all times. If you intentionally or knowingly neglect your duties, your policy likely won’t cover you. So, it is important for officers to commit to careful oversight of the business.
- Establish strict reporting processes. They should relate to claims processing, employee practices, tax filings and budgetary needs. You should always have a paper trail in case of questions about the business’ practices. Careful documentation could help prevent problems and catch other issues sooner.
- Employees and officers must follow strict accountability and ethical practices. Owners should address employee dishonesty with fair penalties and established protocol.
- All agencies must follow established commercial law for all their business practices. The law could help provide insight on proper employee practices, financial reporting and confidentiality statements.
At the end of the day, an officer must follow all protocol required of them at all times. However, when mistakes occur, D&O coverage can be there to help you. Contact one of our agents at 800-460-6424 to learn more about D&O insurance coverage.