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Directors & Officers Insurance - Claims Examples

Common situations where claims can occur

Each of these scenarios illustrate the difficulties that any business could face. Whether the situation is a criminal, civil or regulatory investigation, the need for adequate insurance protection is vital. The examples show the need for an insurance cover that is going to pay for appropriate expert legal defence and resultant awards and damages. Very often, regulatory investigations never progress into a civil or criminal action, yet the legal costs associated with such circumstances can be extremely costly.

Merger

Following the sale of a company, several accounting irregularities are discovered. The Managing Director and Finance Director are sued following an allegation that they had deliberately misrepresented the company’s true financial position.

Health and Safety

An employee is killed during the course of their normal work. The subsequent Health and Safety investigation uncovered poor working practices and the directors are personally prosecuted for failings in their risk management. This policy covers both the initial investigation and the costs of the court case.

Insolvency

Following the failure of a company, two directors are pursued by creditors. It is alleged that, at the time of purchasing materials, they had reasonable knowledge that the company would have difficulty in meeting its debt.

Investigation costs

A company is required to attend an investigation into ‘anti competitive practices’. Although no wrongful act is alleged, several people are required to attend the investigation, each being supported by legal counsel. Although the company is exonerated and no court case follows the legal costs in attending the Hearing are significant.

Outside Directorship

A Finance Director assists a local charity at the request of their company. The charity ceases trading and the director is subsequently required to attend a hearing into the matter. The Charity does not have cover for their costs, but the company would be liable to pay for these costs.

Abuse of position

A director is sued by fellow shareholders for sanctioning a dividend payment without ratifying this with fellow directors.

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