With recent D&O cases focusing on fraud exclusions, extradition and a focus on financial mismanagement, you could easily forget some of the other core exposures for companies and their Directors & Officers.
Law firm K&L Gates reminded us of the need for protection against cases where Directors & Officers are sued for “putting profits in front of safety” in cases where employees suffer fatal accidents on the job – where Derivative Actions can be brought on the back of suits against the company.
Further exposures include where Directors & Officers are held liable for pollution by the company, or where cartel activity occurs (see the 2 British Airways executives resigned after the fuel surcharge price-fixing investigations).
Jane Harte-Lovelace and Sarah Tulpin of K&L Gates’ Insurance Coverage Practice (they defend companies and their Directors and Officers, and don’t act on behalf of insurers) gave a series of tips – specific policy form wordings that can cause the D&O product not to work as expected. I will ask them if we can republish their whitepaper in Advisen Front Page News but here are a few highlights:
- The definition of “wrongful act” needs to include any “breach of duty” as the recent Companies Act of 2006 in the UK codified the duty of Directors & Officers to include the broad definition “duty to promote the success of the company”.
- Ensure that the allocation provisions are in place should the company and the Directors & Officers share defense legal teams and costs.
- Pay particular attention to the definition of “investigation” as it relates to cartel activity
Advisen has a repository of over 2,000 standard policy forms including 400+ D&O policy wordings. Each can be compared on a topic-by-topic basis and with keyword searching, it’s very easy for clients or their brokers to check these terms of coverage. Drop me an e-mail for more information.