DIRECTORS & OFFICERS LIABILITY INSURANCE: PERFECTING GOVERNANCE; LIABILITY CHALLENGES AND QUESTIONS

A new D&O guide, published by Airmic partnered with McGill & Partners, answers 12 frequently asked questions associated with D&O coverage, with questions posed from a director’s perspective.

Airmic and McGill & Partners launch ‘Directors & Officers Liability Insurance: Perfecting Governance; Liability challenges and questions’.

The publication aims to provide an insider’s guide to directors’ and officers’ liability insurance (D&O) for end users, and for board members in particular.

Twelve questions make up the core of the guide, focusing on practical issues that commonly arise.

Although designed to be answered by reference to specific policy wordings, the answers are intended to provide general guidance as to the likely position, subject to the significant caveat that no two D&O policies are the same.

The questions (listed below) are posed from the point of view of directors and board members themselves.

• What limit am I covered for and how do I know it is the right one for my industry sector?
• Am I covered for the right types of exposures especially with regard to emerging risks?
• What happens to my insurance protection when I leave the company?
• What happens to my insurance protection in the event that the company is acquired by or merges with another company?
• What am I covered (and not covered) for and how do I make a claim under the policy?
• What impact (if any) does the company’s ability and willingness to indemnify me have on my insurance cover?
• How (if at all) might the conduct or knowledge of others with whom I share my limit affect my position?
• When (and subject to what conditions, if any) does the policy allow me to appoint a lawyer of my choice to pro tect my interests in the event of a claim?
• If the company becomes insolvent, does the cover remain in place and am I covered for the legal representation costs of interview by the liquidators?
• What else should I be worrying about by way of restrictions or limitations on cover?
• With which and how many employees below board level do I share my insurance limit?
• Is any part of the limit of indemnity ring-fenced for me and/or for my fellow board members?

There tends to be a mystique surrounding directors’ and officers’ liability insurance, the report acknowledges, which often results in a disconnect between the product and its end users, creating the risk of a significant expectation gap in the event of a claim.