Why Would I Need Directors’ & Officers’ Liability Insurance?
A report of Stand-club explains about on job personal risks that may cost their personal property due to their conduct in a professional capacity. In her article, Ms Sarah McGurk, D&O Underwriter – The Standard Syndicate, shares her suggestions on the nature of claims and the possible effect on the individuals to which a directors’ & officers’ (D&O) policy would respond.
While most corporate bodies are protected through public limited liability and other insurances, the individuals within a company are often left unprotected. Depending on the allegations involved, a company may be relieved of its obligation to indemnify directors or officers, at least until the allegation is proven to be false or the individuals are exonerated. Under such circumstances, the directors may be left to personally fund their own legal costs to defend a claim that arises from their conduct in a professional capacity.
How does D&O cover differ from P&I cover?
To many readers of this article, this might not seem to be a significant risk. Your company, be it a shipowning company, a charterer or a ship manager, will most likely buy third party liability protection and indemnity (P&I) insurance. Therefore, it may be easy to assume that all claims and costs incurred, even those arising as a result of actions taken by directors and officers of the company, will fall within the scope of P&I cover. Actually, this may not always be the case.
There are many cases where the management team of a shipping company were alleged to have been responsible for losses caused to others. Suits have been brought for loss of life, loss of profits, unfair trade practices or making personal profit at the expense of the company itself. While the majority of claims are covered by P&I or asset (e.g. hull, cargo) insurances, allegations against individual directors may not be at times.
There was a case where shareholders have challenged the acquisition of vessels by a company on the basis that these transactions were allegedly the result of self-dealing by directors of the company and that the company entered these transactions on unfair terms.
Not uncommon also are claims by shareholders against directors in respect of alleged excessive payments of directors’ fees and other remunerations.
Source: The Standard Club