Directors and Officers Liability Insurance Overview

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Directors and Officers LiabilityInsurance
Overview

• Louise Kidd
• Senior Underwriter, AIG Ireland Limited

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Content

• Management Objectives Responsibilities
• Current Legal Landscape for DOs
• Typical Claimants against DOs
• What is Directors and Officers Insurance?
• DO Policy Construction
• Key Definitions under a DO Policy
• Exclusions what is not covered

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Management Objectives Responsibilities

• Objectives
• Preserve and enhance shareholder capital
• Act in the best interests of the company
• Responsibilities
• Under Statute
• Under Common Law

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Multiple Sources of Liability

• Tort (Civil Wrong)
• Care Skill
• Fiduciary Duty
• Statute
• Contract

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Web of Legislation

• Companies Act 1963
• Companies Act 1990
• Competition Act 1991
• Safety, Health Welfare at Work Act 1989-2005
• Environmental Protection Act 1992
• Companies (Auditing Accounting) Act 2003

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Directors Compliance Statements their
Interpretation
EU Directives
Environmental Legislation
Tax Legislation
XYZ Limited
Industry specific Legislation
Company Acts
Competition Act
Health Safety Legislation
Employment Legislation
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Claims Against DOs

• Typical Claimants
• Shareholders
• Employees
• Competitors
• Regulatory Bodies
• Creditors
• Fellow Directors

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What is DO Insurance?

• DO insurance indemnifies the directors and
  officers for claims against them personally for
  wrongful acts committed
• Includes cover for judgements, settlements and
  defence costs
• Purchase of DO Insurance now permitted under
  Companies (Auditing and Accounting) Act 2003 S.
  56

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Indemnification

• Indemnification Provisions Companys Articles
  of Association
• When Indemnity is legally permitted/unavailable
• When decision to indemnify is not automatic

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DO Policy Construction
Covered claim against an insured person
Indemnification?
No
Yes
Insured Director/officer
Insured Company Balance Sheet
Personal Assets
Corporate Assets
DO Insurance Side A
DO Insurance Side B
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Key Definitions of a DO Policy

• Who is an insured person?
• Past, present or future directors and officers
• Employees acting in a managerial or supervisory
  capacity
• Lawful spouses of directors and officers
• Heirs, estates and legal representatives

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Key Definitions of a DO Policy

• Policy is triggered by a claim
• A written demand
• A civil proceeding
• A criminal proceeding
• A formal regulatory or administrative proceeding
  against an insured person

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Key Definitions of a DO Policy

• Wrongful act
• Any actual or alleged
• Breach of trust, breach of duty, breach of
  warranty of authority
• Neglect, error, omission
• Or any other act in their capacity as a Director
  or Officer

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Key Definitions of a DO Policy

• Loss
• Damages
• Judgements
• Settlements
• Defence Costs

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Exclusions What is not Covered

• Exposures where covered elsewhere e.g.
  Professional Indemnity Exclusion, BI/PD Exclusion
• Exposures excluded where uninsurable by law
• Pending and Prior Litigation

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In Conclusion

• Directors conduct is increasingly under the
  microscope and in the current climate.
• DO Liability insurance, which, in the past,
  might have been considered an optional extra,
  must now be considered essential for public,
  private and unlimited liability companies.

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• QUESTIONS?