Directors and Officers Insurance
Sutherland Insurance is a fifth-generation independent brokerage in Guelph, Ontario that places directors and officers insurance across the province. Directors and officers insurance covers the personal liability of individual directors and officers for decisions made governing a corporation, and the corporation's indemnity to them. Sutherland Insurance has placed commercial business from Guelph, Ontario since 1870.
Key takeaways
- Directors and officers insurance is not required by Ontario statute, and it is commonly required by lenders, investors and prospective board members before they will serve.
- Under Ontario's Business Corporations Act, directors can be held personally liable to employees for up to six months' unpaid wages.
- Ontario's Business Corporations Act permits a corporation to indemnify its directors and officers and to purchase insurance on their behalf.
- Directors and officers insurance is written on a claims-made basis, so the policy in force when the claim is first made responds.
- Who it is for
- Directors and officers of Ontario corporations, non-profits, charities and condominium boards
- Legally required in Ontario
- No, not required by provincial statute
- Commonly required by
- Lenders, investors, funders, and directors as a condition of joining a board
- Coverage trigger
- Claims-made: the policy in force when the claim is first made responds
- Side A coverage
- Pays the individual directly where the corporation cannot or will not indemnify
- Statutory wage liability in Ontario
- Up to six months' unpaid wages, under the Business Corporations Act
What is directors and officers insurance?
Directors and officers insurance covers the personal liability of the individuals who govern an organization for claims arising from their decisions in that role. It pays defence costs and damages where a director or officer is alleged to have breached a duty owed to shareholders, members, employees, creditors or regulators. It also reimburses the organization for indemnifying them.
The coverage is built in three parts. Side A pays an individual director or officer directly where the organization cannot indemnify them, most importantly on insolvency, which is exactly when personal exposure peaks. Side B reimburses the organization for indemnity it has paid. Side C covers the entity itself for claims made against the organization alongside its directors.
What can an Ontario directors and officers insurance policy cover?
What a policy can cover
- Defence costs and damages for claims against individual directors and officers arising from their governance decisions
- Alleged breach of fiduciary duty, duty of care, or duty of loyalty owed to shareholders, members or the organization
- Employment practices claims including wrongful dismissal, harassment and discrimination, where that extension is included
- Regulatory investigations and statutory proceedings brought against directors or officers personally
- Claims by creditors, funders or lenders alleging that directors permitted the organization to trade improperly
- Side A coverage paying the individual directly where the organization is insolvent or otherwise cannot indemnify
Commonly excluded under standard Ontario directors and officers insurance wordings
- Deliberate fraud, dishonesty and personal profit obtained unlawfully, once established by a final adjudication
- Bodily injury and property damage, which commercial general liability insurance addresses
- Claims arising from professional services delivered to clients, which professional liability insurance addresses
- Matters known before the policy incepted, and claims arising from circumstances already notified
- Claims brought by one insured against another, subject to the exceptions stated in the wording
- Unpaid taxes, statutory remittances and fines that are uninsurable at law
Exclusions vary by insurer and by policy form; the issued policy governs.
How much does directors and officers insurance cost in Ontario?
The factors that move an Ontario directors and officers premium, in approximate order of influence, and why insurers look at each one.
| Rating factor | Why |
|---|---|
| Type of organization | Securities exposure drives the largest directors and officers claims. |
| Total assets and annual revenue | Organization size proxies the value at stake in any governance dispute. |
| Financial condition and solvency | Creditor and insolvency claims are the most severe private-company exposure. |
| Limit selected | The limit is shared across every insured individual and every claim in the year. |
| Employment practices extension | Employment claims are the highest-frequency exposure for most Ontario boards. |
| Number of employees | Employment practices frequency scales directly with staff numbers. |
| Governance and board composition | Documented process is the primary defence to a duty-of-care allegation. |
| Operations or securities exposure in the United States | United States jurisdictions carry higher award severity and class-action frequency. |
What situations does directors and officers insurance commonly address in Ontario?
Directors and officers policies are arranged for a wide range of governance circumstances across Ontario, and the coverage available differs in each. The situations below are common among Sutherland Insurance clients in Guelph and across the province, and each one changes which markets will write the risk.
- A Guelph charity board facing a claim from a former employee alleging wrongful dismissal.
- A private company's directors named personally in a dispute with a minority shareholder.
- A non-profit whose directors are pursued for unpaid wages after the organization ceases operations.
- A condominium corporation board sued by unit owners over a decision on a major repair.
- A growing company raising outside investment, where the incoming investor requires coverage as a closing condition.
- A prospective director asking to see the policy before agreeing to join the board.
How Do I Get Business Insurance Through Sutherland Insurance?
Getting insurance through Sutherland Insurance is simple. You can request a quote online or call 519-822-0160 to speak with a licensed broker. We take the time to understand your business, identify your exposures, and find coverage options that fit your needs.
Our Process:
- Request a Quote. Complete an online quote request or call our office to speak with a licensed insurance broker.
- Tell Us About Your Business. Your broker will gather information about your operations, property, revenues, employees, vehicles, contracts, and any other areas that may require coverage.
- Review Your Risks and Coverage Needs. We assess your business exposures and insurance requirements to determine the appropriate coverage limits and options.
- Market Your Account. Sutherland Insurance compares the available commercial markets to help find the best combination of coverage, service, and price.
- Present Your Options. Your broker will review the available quotes and provide recommendations based on your specific needs and goals.
- Bind Coverage and Provide Documentation. Once you select coverage, we arrange the policy and provide any required documentation, including certificates of insurance for clients, landlords, lenders, or other third parties.
What makes Sutherland Insurance different from a direct insurer?
When a claim happens, Sutherland Insurance acts for the client with the insurer, and an in-house claims representative is available on any claim. Sutherland Insurance is an independent brokerage and compares the markets it holds contracts with rather than selling one company’s product. A person answers the phone at Sutherland Insurance, 519-822-0160, Monday to Friday, 8:30 a.m. to 5:00 p.m.
Frequently asked questions
What is the difference between Side A, Side B and Side C coverage?
Side A pays an individual director or officer directly where the organization cannot or will not indemnify them, which matters most on insolvency. Side B reimburses the organization for indemnity it has already paid on their behalf. Side C covers the entity itself for claims made against the organization alongside its directors.
Does directors and officers insurance cover employment claims?
Many Ontario directors and officers policies attach an employment practices liability extension covering wrongful dismissal, harassment and discrimination claims. On other wordings it is a separate policy. Employment claims are the highest-frequency exposure most Ontario boards face, so whether the extension is included materially changes the coverage. The issued policy governs.
Does a corporate indemnity replace directors and officers insurance?
An indemnity in a corporation's by-laws is a promise that depends on the corporation's ability to pay. It fails at exactly the moment personal exposure is highest: insolvency, wind-up, or a dispute with the corporation itself. Side A coverage exists to respond in that gap by paying the individual director directly.
Is directors and officers insurance claims-made?
Yes. Directors and officers insurance responds to claims first made against an insured during the policy period and reported as the wording requires, subject to the prior and pending litigation date. A claim arising from a decision made years earlier is covered where the policy in force when the claim arrives responds and no exclusion applies.
How many markets does Sutherland Insurance place management liability across?
Sutherland Insurance places commercial business, including directors and officers, across the markets it holds contracts with together with multiple managing general agents and affiliates across Canada. It is an independent brokerage licensed by the Registered Insurance Brokers of Ontario. It is not tied to any single insurer.
What happens to cover for a director who has resigned?
Directors and officers insurance responds to claims made while a policy is in force, not to the year the decision was taken. Past decisions by a director who has resigned are reported under the policy the organization holds when the claim arrives, provided cover has renewed without a gap. Where an organization stops buying cover after a sale or a wind-up, run-off keeps past acts reportable, and the wording sets its length.
Get your directors and officers insurance quote
A licensed Sutherland Insurance broker compares the available markets on every quote request.
Get your directors and officers insurance quote Call 519-822-0160
A real person answers, Monday to Friday, 8:30 a.m. to 5:00 p.m.