Canadian Insurance magazine’s August 2007 issue has an article concerning new challenges facing businesses from the Human Rights reforms coming in Ontario – Actually they come into play February or March of 2008. So how will this affect you as a business owner – Simple: Employees will now be able to take legal action against your company in court directly for human rights damages (for example: race discrimination law suits). Solution – Make sure your Employment Practises are sensitive to these issue (within reason) and start talking to an insurance broker about Director and Officer’s Liability Insurance.
Director’s and Officer’s Liability insurance is just another layer in the fight to protect your corporation from lawsuits and financial devastation. As directors of “for-profit” and “non-profit” organizations, you can be held liable for things like:
- misleading representations,
- copyright infringement,
- unpaid wages
- unpaid taxes
- conflict of interest
- wrongful dismissal
Some would argue that we in Canada don’t sue as much as our neighbours to the south. but the possibility of lawsuits will increase with the advent of Bill 107 and once you open up the door, people will go through it.
How does this type of insurance exactly protect you? Well to take a snippet from the Guarantee Company of North America website (www.gcna.com/guarantee/) ” (d&0 insurance)… Protects current, past and future directors and officers as well as their spouses, estates and heirs… for their legal liability as a result of a claim against them for wrongful acts committed in their role as director or officers” Big Stuff.
The “for-profit” corporations can usually offset the cost of the Directors & Officers Policy by integrating it into the cost of doing business but the “non-profit” organizations have a real hard time of raising money let alone raising the additional funds for a D&O Insurance Policy. Some solutions are starting to be offered in the marketplace by insurance companies that handle home insurance- BUT BEWARE: They are limited in what they protect you for!
The home insurance policies may protect you if you are responsible for injuring or causing damage to property while volunteering your time. Coverage, like many other liability policies, usually includes the cost of defending you (court costs) etc) – subject to exclusions and rules of the policy. The sources of potential claims that I mentioned above are not covered! As such, you may be personally responsible for the costs of defending your actions while acting as a member of a volunteer board of directors. (Please don’t take this as a call to stop volunteering – Please involve yourself if you can – there are an estimated 160,000 ish non-profit organizations out there!)
As directors of incorporated organizations, you will have to properly assess the risks that you are exposed to and try your best to minimize your exposure to that risk. Controlling your risk will bring you piece of mind and it won’t restrict your ability to be a stable and functional piece of the Canada’s Corporate or Non-Profit Sectors.