Although liability in such suits may be potentially very high, the law allows, and sometimes requires, corporations to indemnify the director or officer for their expenses and losses. It also allows corporations to purchase liability insurance to cover these losses and expenses.

There are three other areas of liability that may expose corporate directors and officers to liability-pension fraud, workers' compensation fraud, and environmental protection violations.

If a corporate officer or director defrauds a private employee pension fund, he is subject to federal, but not state, penalties because the federal Employee Retirement Security Act (ERISA), which apparently supercedes state law (20 USCA § 1144(a)). The federal Department of Labor, the Internal Revenue Service, and the Justice Department investigate possible violations of private pension plans. The Justice Department may prosecute criminal charges regarding abuse or theft of pension funds (see OLR Report 2002-R-0670 for a more thorough discussion).