Directors
and Officers Liability Insurance
Under the common
law, and under the statutes of most jurisdictions, directors and officers
owe certain duties and standards of care in managing the affairs of the
corporation they serve. Basically, directors and officers must discharge
their duties with the care and skill of a reasonably prudent person. If
failure to perform these duties with due care results in financial damage
to the corporation, the negligent director or officer can become personally
liable to make restitution to the corporation’s stockholders. Or, under
different circumstances, directors and officers can become liable to parties
outside the corporation, such as creditors or competitors, as a result
of their mismanagement.
