Untitled Document
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Directors' and Officers' Liability Insurance
In a recent spate of litigation, a number of adverse court verdicts
regarding the liability of directors and officers of companies to
a third party were passed where the directors and officers were
held
personally liable for payment of compensation to the third party.
Ordinarily, the directors and officers are bound by duty towards
the company itself,
shareholders, employees, creditors, customers, competitors, members
of the public, government and other regulatory bodies. Any breach
or non-performance in the duties can result in claims against
the companies
and/or its directors of the company by reason of any wrongful act
in their respective capacity. The Directors' and Officers' Liability
Insurance
policy has been designed specifically to meet any financial liabilities
imposed upon them.
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Suitable
This policy is necessary
for directors and officers of every company if they wish to avoid
potential litigation owing to
- Failure of supervision.
- Inaccuracy in statements of financial accounts.
- Lack of judgement and good faith
- Mismanagement of funds.
- Mis-statements in prospectuses.
- Allotment of shares
- Unauthorised loans or investments
- Failure to obtain competitive bids
- Imprudent expansion resulting in a loss.
- Using inside information
- Unwarranted dividend payment, salaries or compensation
- Misleading statements filed with the stock exchange
- Misrepresentation in acquisition agreement for the purchase
of another company.
- Wrongful dismissal of an employee
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Risks covered
This policy covers all claims
made in event of
- Mergers, takeovers and divestment.
- Liquidation.
- Changes in control of shareholding.
- Share
issues.
- Shareholder claims.
- Misdeeds of co-directors.
- Trustee accountability
and responsibility.
- Customs and excise allegations.
- Administrative
liabilities.
- Termination of employment.
- Disposal of
old firm/ entry of new owners.
- Miscellaneous litigation.
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Compensation Offered
The extent of indemnity being severely restricted by the Companies'
Act will reimburse the extent of legal costs expended only if the
Director/ Officer successfully defends the act taken against him.
Also, coverage is available on a 'claims made' basis and applies
only to claims made against the Board of Directors during the policy
period, irrespective of when the wrongful act occurred.
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The cover applies to
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Liabilities arising from
any claim made against Directors and/ or Officers of the company
by reason of any wrongful act in their
respective capacity.
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Liabilities against the company where it is required to indemnify
the Directors/ Officers pursuant to common or statutory law provisions
or Memorandum and Articles of Association.
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The company and its subsidiaries that are
under the common control of the Directors/ Officers.
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Exclusions
- The policy will not pay for the losses
arising from any claim.
- Prior
and pending litigation and claims submitted under previous policies.
- Bodily injury, sickness, disease, emotional distress, death,
damage or destruction of tangible property including loss.
- Insured v/s Insured. viz. Directors suing each other
- Illegal personal profit and remuneration.
- Deliberate,
dishonest or fraudulent acts.
- Pollution and/ or contamination.
- Insider trading.
- Outside directorship (can be
covered with specific information)
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