Directors & Officers Liability Insurance ~ Insurance Academy
The director’s legal responsibilities are specifically regulated in Law No. 40 / 2007 article 97 points (3) :
“Each Member of the Board of Directors is personally responsible for the loss of the Company if the person concerned is guilty or negligent in carrying out his duties as referred to in paragraph (2).”
Whatever decisions the leader makes, they all have a positive or negative impact; even have supporters and opponents. Leaders must make the right decisions for the benefit of the company. The D&O policy assists the leader/director in making decisions. D&O shields the director from prosecution by others for the decisions he makes.
Who can sue / file a lawsuit? Employees, other directors, governments, regulators, curators, customers, competitors, shareholders, suppliers, contractors, communities, NGOs.
Who bears the loss?
1. Pay for yourself
2. Company where you work
3. Insurance company
Compensation by the company (corporate indemnification)
Payment of the award, settlement and defense fee by the Company is not unconditional. There must be:
– Approval of the board of directors/ commissioners, shareholders
– Company’s financial condition
WITH LIMITATIONS:
- Prohibited jurisdiction of a country (Latin America, Australia, France)
- Prohibited by law (example: US SEC law for SEC violations)
- Not approved if the board of directors/commissioners decides, the director’s actions are not in good faith
- Not approved if the claim is submitted by the shareholders
What does D&O insurance provide?
- Guarantee for error management and omission
- Wrongful act –> honest mistake –> if the decision taken is wrong so that the 3rd party loses.
Who is guaranteed?
- Director
- Commissioner
- A person who is considered a director or officer by law
- Company secretary
- Employee / manager
- Heir
What is covered not the title, but its function/managerial function. What is covered personalnot the company.
