Liability insurance for directors and officers has typically been viewed as a routine thing, in the past. It’s just one of tasks things that needs to be done, and many people give it little thought. However, it is important to understand what the implications of this “box ticking” activity really are.
Here are some of the most important aspects of these insurance policies, as well as the potential problems that might be encountered. These pitfalls should be carefully noted or get some expert advice from lawyers, to avoid falling to them.
Different policies will typically vary, regarding what will trigger a notification. That means directors and officers will not always be notified by the same events, depending on their company and the policy it holds. If an insurer is notified, it is important to be aware that proceeding events might not actually be covered. This will, of course, run the risk of exposing directors and officers to potential claims, even though they believed they were covered.
There is also a number of different exclusions in policies, which are standard, even if they are not apparent when a policy is made. Since these can directly affect the amount of protection officers and directors receive, it is wise to pay close attention to them. Here is a brief list of exclusions to look into:
- Insured versus insured
- Professional indemnity exclusion
- Prospectus liability
- Personal conduct exclusion
Director and officer insurance usually protects the current, past, and any future directors or officers of a company. While that is the case, this depends on the actual size of a company, and the level of their operations. It’s a mistake to assume that coverage is the same for all companies, just because they seem to have the same policies in place. As such, extra personnel can also be covered, including supervisory members of board, members of management committees, superannuation corporate trustees, and several other types of employees.
Because of a class action that was brought about by some shareholders, against Force Group Limited, it’s clear that both officers and directors will continue to face more and more damage from individual claims. That is why it is a critical step for all corporations to regularly review their policies, and make sure that they have appropriate coverage. This will allow them to ensure that their operations and assets are adequately protected, in the case of future claims against them.