I t is not uncommon for directors and officers of privately owned construction companies to feel that they have little or no personal risk exposure. However, this belief is arguably misguided, as a number of statutes in Canada allow for the imposition of personal liability on directors and officers for the actions of the corporation or its employees. In fact, due to the nature of the work that is carried out in the construction industry, directors and officers of a construction company have the potential to be held liable for, among other things, workplace health and safety violations, corporate breaches of trust, civil fines, unpaid employee wages, government remittances and employment claims. While a corporation may indemnify a director or officer in many situations, if that individual is also the owner of the company, they could end up paying the cost of indemnification indirectly out of their own pocket. In Canada, there are numerous examples of directors, officers and employees at construction companies being held personally liable for either their own actions or the actions of the corporation. For instance, under the Ontario Construction Act (the Act), directors and officers of a corporation may be held liable for a breach of trust by the company. In one case, the Ontario Superior Court held a defendant corporation and three of its directors and officers liable for $135,982.44 owed to a flooring company because the corporation had insufficient funds to pay the amount owing. Even though there was no direct evidence to indicate that the funds owing had been misappropriated by the company or its employees, the court found that the directors and officers of the corporation must have been aware that the sub-contractor had not been paid in full when the funds were used to pay other bills. INSURANCE INSIGHTS DIRECTORS AND OFFICERS OF A PRIVATE CONSTRUCTION COMPANY CAN FACE DIVERSE PERSONAL RISK EXPOSURES Should your company consider Directors’ and Officers’ liability (“D&O”) insurance? BY JENNIFER DRAKE 28 UNDERGROUNDER Fall 2018