Serving on a board can expose you to a number of potential lawsuits, including alleged acts of negligence, misjudgment or financial mismanagement. Being found guilty of any act of misconduct puts you at risk of losing your personal assets. A common fear of personal liability keeps many people from serving on a board of directors. People generally establish corporations so they can undertake activities without the threat of a personal liability lawsuit. In most cases, directors and officers are immune from liability for corporate acts, and as a general rule, courts will allow corporate creditors to seize only corporate owned property. However, the courts will not allow creditors to “pierce the veil” and seize personal assets when a corporation has not followed the formalities required of a corporation. This most often occurs when the corporation takes actions without the board of directors having granted formal authority, or corporate assets have not been segregated from the assets of directors.
Did you know many common, frivolous legal claims may qualify as exclusions in your existing policy – for example, claims of sexual harassment or molestation are usually excluded from traditional business insurance policies?
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