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Corporate Directors and Officers: What to Do When Facing A Claim For Violation Of Powers & Duties

Wed Aug 17th, 2022 on     Insurance Law,    

If you are a director or officer of a corporation, you already know that your position gives you power, but it is not unfettered. There are duties and obligations that you must comply with as well. All too often, even when you follow through with those responsibilities, you may be accused of misconduct by any number of people, including shareholders, customers, vendors, suppliers, employees, and creditors. When this happens, you need counsel from the Miami insurance law attorneys at Ver Ploeg & Marino. 

Powers of Corporate Directors & Officers

Corporations have boards made of directors that manage the affairs of the corporation. These directors typically handle the big decisions that need to be made, such as corporate policies, deciding to declare dividends, and decisions about employee pensions and compensation. They are required to act within the scope of powers given to them by the articles of incorporation for the corporation. They must also act in accordance with the law and appoint officers for the corporation. 

Officers of a corporation are generally placed in charge of routine matters, such as decisions regarding how the corporation operates on a daily basis. Common types of officers in large corporations are Chief Executive Officers (CEO), Chief Operations Officer (COO), and the Chief Financial Officer (CFO). The powers of any particular officer are related to their title. For example, a CEO typically has the final say in the day-to-day operations as they are the highest ranking employee. A CFO is able to make decisions regarding the finances of the corporation. It is possible for these roles to be combined, and it is also possible for an officer to also be on the board of directors.

Duties of Corporate Directors & Officers

Directors and officers of a corporation have a fiduciary duty to the company as well as its stockholders. This means that they are required to act in a manner and make decisions that are beneficial to the corporation and the shareholders; their main concern must never be how to gain a personal benefit from the powers that they have acquired due to their corporate position. 

Typical corporate directors duties include:

  • Hiring and firing of senior executives
  • Staying up to date on developments and information related to the corporation
  • Participating in corporate meetings 

Officers’ duties are laid out in the by-laws of the corporation, and actual duties vary by officer title. As their duties include how the corporation operates every day, officers are an integral part of any corporation. 

Common Claims Made Against Corporate Directors & Officers

There is a myriad of different claims that are made against directors and officers of corporations. Some of the most common our Miami insurance law attorneys have seen are listed below. 

Stock-Drop Lawsuit

Stock-drops are never a development that is welcomed by shareholders. When they occur as a result of a corporation’s actions or disclosures, stockholders may pursue a stock-drop lawsuit. These lawsuits are generally predicated on the proposition that the directors and officers were intentional in making misrepresentations or omitting important information in quarterly filings, annual filings, or public statements. 

Breach of Fiduciary Duty

Breach of fiduciary duty lawsuits are usually brought by a shareholder or shareholders. These claims allege that the directors and or officers breached their fiduciary duty and that as a result of the breach, the shareholder, or shareholders, were damaged. 

Failure to Comply with Laws Regarding Employees

There are certain rules which all directors and officers must comply with when dealing with employee matters. For example, they must never participate in any type of discrimination based on:

  • Sexual Orientation
  • Age
  • Disability
  • Religion
  • Pregnancy
  • National Origin

Sexual harassment should never be accepted or tolerated in any place of employment. When corporate directors and officers participate or allow sexual harassment to occur, they open themselves up to claims from their own employees.

What To Do When You Are A Corporate Director Or Officer Accused of Misconduct

When a director or officer of a corporation is sued for misconduct, the first place they need to look for assistance is at their insurance coverage. In particular, they need to become familiar with the terms of their Directors & Officers (D&O) Liability Coverage

D&O insurance is designed for situations such as this. It protects the personal assets of directors and officers when they are sued. Without it, the leaders of the corporation take a chance on being held personally liable for any damages the plaintiff is awarded. In addition to protecting the personal assets of the directors and officers, D&O liability insurance also pays for the Miami insurance law attorneys needed to mount a proper defense. In other words, the insurance pays for the legal representation the corporation’s leaders need when they are sued for misconduct. 

Unfortunately, D&O liability coverage is sometimes not the simple answer these professionals are looking for. Instead of providing the coverage the director or officer is seeking, the insurance company denies their claim. When this happens, the insured is often left feeling as though they are out of options. It is at times like this that the Miami insurance law attorneys at Ver Ploeg & Marino step up to the plate to help the insured. With decades of experience, the lawyers at Ver Ploeg & Marino are skilled at contract interpretation and providing the representation insureds need to obtain the compensation they are owed. 

Speak With One Of Our Experienced Miami Insurance Law Attorneys At Ver Ploeg & Marino

At Ver Ploeg & Marino, we are a firm that focuses solely on representing insurance policyholders that are being denied the coverage they need from their insurance companies. We handle sophisticated and complicated claims with care and concentrate our efforts on reaching the best outcome possible for our clients. If you would like to discuss your coverage issues with one of our Miami insurance law attorneys, contact our firm to schedule an appointment.

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