When Leadership Is on the Line: Why D&O Insurance Matters More Than Ever
By Linda Buckton & Gina Seitz
Being in charge comes with a lot of responsibility –and sometimes, a lot of risk. Whether you’re the owner of a growing business, a director on a nonprofit board, or part of a startup’s leadership team, your decisions can carry legal consequences.
That’s where Directors & Officers (D&O) Liability Insurance comes in.
D&O insurance helps protect people in leadership positions if they’re accused of making a bad decision — whether it’s a mistake, an oversight, or just a decision someone else didn’t agree with. These claims don’t have to be true to cost a fortune. Legal defense alone can reach tens of thousands of dollars, even before a case is settled or dismissed.
Why Small and Midsize Businesses Need It Too
Many people think D&O coverage is just for big corporations with investors and formal boards. But in reality, smaller businesses can be even more vulnerable. They often don’t have legal teams or compliance departments – which means the people at the top are making the big calls, and they’re doing it without a safety net.
Some common examples of D&O claims include:
- Making a financial decision that’s later questioned (like offering credit when it wasn’t warranted)
- Allegedly misrepresenting a product, investment, or service
- Not reviewing important documents carefully before signing
- Failing to oversee other employees’ actions
And here’s the tricky part: even if you didn’t do anything wrong, you can still be sued — and you’ll still need to pay for a legal defense.
Employment-Related Claims Are on the Rise
One of the biggest sources of D&O claims today comes from inside the business — specifically, from employees.
This is known as Employment Practices Liability (EPL), and it includes things like:
- Wrongful termination
- Harassment
- Discrimination (based on race, age, disability, gender, etc.)
- Retaliation
- Failure to promote
These lawsuits can come from current or former employees – and even from contractors or job applicants, depending on the situation. And they don’t have to be major scandals to cost your business.
For example, a small restaurant was hit with $15,000 in legal fees after a former employee accused them of discrimination. Another small company paid over $40,000 in defense costs after a wrongful termination suit. In one case, a claim went to arbitration and ended in a $4 million payout.
Why It Matters More Than Ever
The workplace is changing fast. Social norms, employment laws, and public expectations have shifted dramatically in recent years. At the same time, there’s more access to legal resources and public platforms – which means if something goes wrong, it’s more likely to become a formal complaint or even a lawsuit.
Meanwhile, regulators, shareholders, employees, and even customers are paying closer attention to how businesses are run. For people in leadership roles, that means more accountability – and more potential exposure.
What D&O Insurance Actually Covers
D&O insurance isn’t just about lawsuits. It’s about giving leaders the confidence to make hard calls without worrying that one wrong move will cost them everything.
A good policy typically covers:
- Legal defense costs
- Settlements or judgments
- Investigations related to a claim
Depending on the policy, you might be able to choose your own lawyer or use a legal team provided by the insurer. And in some cases, you can also extend coverage to independent contractors or volunteers – a huge plus for nonprofits or lean businesses.
Peace of Mind for Decision Makers
At the end of the day, no one sets out to make a bad decision. But leadership means risk – and D&O insurance helps protect the people who take it.
If you’re in a decision-making role, ask yourself:
- What would happen if someone accused me (or our leadership team) of wrongdoing?
- Could we afford the legal fees to defend ourselves?
- Would this impact our business’s reputation, finances, or future?
If the answer to any of those questions gives you pause, D&O insurance might be a smart addition to your risk management strategy.
Because when you’re leading a business, it’s not just about protecting your company – it’s also about protecting yourself.
Linda Buckton
Vice President,
Client Executive
T: 403-451-4147
lbuckton@bflcanada.ca
Gina Seitz
Vice President,
Client Executive
T: 604-678-5419
gseitz@bflcanada.ca
