The Potential Ramifications of Indemnification for Your Business
Indemnification, otherwise defined as an obligation to compensate a party with regard to legal liability in case of losses, ought to be at the forefront of your mind as you put together contracts for your company. In defining what indemnity means for certain employees, usually at the director and officer level, you can establish strong protective measures for the company in case of trouble. As you draft contracts, it may become important to discuss what level of presumptive indemnification will be important for your business.
What is Presumptive Indemnification?
Presumptive indemnification is a proviso included by insurance companies when putting together policies regarding directors and officers, or D&Os. This type of article stipulates that it will be presumed that, even if not stated outright, the company will indemnify its directors and officers in case a claim is made against the company.
Why is This Important for You?
If an insurance company includes a presumptive indemnification clause in your contract, it can mean that your company, or the directors and officers personally, could be on the hook to pay substantial amounts regarding a claim, instead of the insurer.
With this potential risk, it is important to read the fine print of policies and contracts. In this way, you can discuss the limits of indemnification with your insurance company as well as your directors and officers with the goal of reaching a satisfactory agreement for the future operations of your business.