Helping you understand D&O insurance

As a Director, you can be held personally liable for not just your own mistakes but also the mistakes and errors of others. 

Growing market for D&O insurance

Directors & Officers Liability Insurance is one of the least understood insurance policies yet at the same time the market for D&O insurance has grown significantly in the last decade.  High profile cases such as Bridgcorp, Feltex and Pike River mean there is greater awareness and businesses are reviewing their risks and setting up D&O insurance programs to ensure they are protected against allegations of mismanagement.

 

NZ Claims Examples

Sometimes the best way to explain insurance cover is to give claims examples.  And while any claim on a D&O policy would be interpreted on a case by case basis, these NZ claims might help raise your understanding of how a D&O policy could be beneficial to your business.  Source: Vero Liability

 

1. Retirement Home Director Accused of providing incorrect info

The Financial Markets Authority wrote to the company director of a retirement home regarding the home’s annual registration. The letter suggested he had submitted incorrect information which could result in a fine. With the agreement of the D&O insurer, some accounting and legal assistance was provided which proved that no such breach of regulations had occurred.

 

2. Energy Company Unjustified Dismissal

Personal claims against individual directors and officers can be brought by staff who may allege that they were discriminated against (age, gender, religion etc.) or had their employment terminated unfairly.

An energy company was forced to reduce staff numbers, redundancies were announced and several of the affected members of staff consulted an employment lawyer. They began an unjustified dismissal action against the company and the individual directors responsible for their dismissal. The D&O insurer was notified and solicitors appointed to defend the allegations against the individual directors. An allocation of costs was agreed for the defence of the company (not itself insured under a D&O policy) and the defence costs for the insured directors. The directors successfully defended the claims at the employment tribunal hearing.

 

3. Logging Operators Prosecuted under Resource Management Act

The directors of a company involved in logging operations were prosecuted (along with the company) under the Resource Management Act following the release of sediment into a nearby stream. The prosecution involved allegations or ‘wrongful acts’ by the directors. The policy responded to pick up defence costs for the directors.

 

All Businesses are Exposed to Risks

Any business, regardless of its size or structure can see directors and officers exposed to serious liability risks with claims potentially coming from a range of areas such as:

  • Shareholders
  • Debt holders
  • Suppliers
  • Government or industry regulators
  • IRD
  • Your employees

 

A good broker will be able to assist in setting up a D&O program that is designed and tailored to your individual business’ needs and one that covers both defence costs and any damages that may be awarded. 


Greg Greenwood

About the Author

Name: Greg Greenwood        

I'm the South Island Operations Manager at Rothbury Insurance Brokers and live in Christchurch.  I have a portfolio of commercial clients, many who have been my clients for years. My experience of earthquake claims and issues is called…
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I'm the South Island Operations Manager at Rothbury Insurance Brokers and live in Christchurch.  I have a portfolio of commercial clients, many who have been my clients for years. My experience of earthquake claims and issues is called upon frequently to assist clients and those needing insurance advice in the region.  I am also the Chairman, Canterbury region for IBANZ (Insurance Brokers Association NZ).

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Disclaimer: The articles published on this blog are designed to provide general information and do not take into account any individual’s particular circumstances. We recommend that you obtain professional advice on your requirements before making any decision about a financial product.
 


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