D&O insurance
Civil Liability Insurance for company directors and managers. Company directors are exposed to a series of risks due to non-compliance with legal obligations of which many are unaware. Failure to comply with these obligations entails personal liability for the director for which your personal assets are at stake.
The solution is to take out an insurance policy Directors' and Officers' Liability (RC D&O) that protects the personal assets of directors and managers in the event of claims from shareholders, creditors, employees, third parties or the company itself, for damages caused by improper acts carried out in the exercise of their duties.
But let's go a little deeper and analyse what kind of liabilities can be imputed to the directors and managers of a company.
Liability in the commercial field
The liability of directors and managers in the commercial sphere arises from the breach of the functions and obligations inherent to their position. The director is liable for damage caused to a third party, a shareholder or the company as a result of an unlawful and negligent act or omission.
Liability in insolvency proceedings
In the field of bankruptcy liability the law regulates the liability of the administrator who was in office at the time when the company entered into insolvency proceedings.
The D&O policy does not stop its coverage when the Company enters into insolvency proceedings, but maintains coverage for Directors and Officers until one of these circumstances occurs:
-the declaration of insolvency of the Policyholder
-the resolution that agrees the substitution of the insured persons in the event of voluntary insolvency of the Policyholder.
-the decision to open the liquidation phase of the Policyholder.
Liability in the field of taxation
The tax authorities may (without the intervention of a judge) declare the director to be vicariously liable for the payment of the company's debts in the cases established by law.
Responsibility in the workplace
The law does not provide for a derivation of liability to the administrator in such a specific manner, but the administrator can be held liable through the laws of a more general scope. Examples are liability arising from unfair dismissals or from allegations of mobbing by employees.
Criminal liability
Criminal law contains a list of offences that directly affect directors and executives (corporate offences). If they are criminally convicted, the judge may consider that they should also be sentenced to pay compensation as civil liability.
Temporal and Territorial Scope of D&O Insurance
It is very important to know the temporal and territorial scope of the insurance.
Temporary ScopeThe first time claims are covered against the insured person during the term of the insurance for a wrongful act of the insured director or manager committed during or prior to the term of the insurance (unlimited non-retroactivity). There are, on the other hand, certain periods (automatic or not) that extend the insurance cover beyond its expiry date, even for life, as in the case of retired persons.
Territorial scope; In general, claims filed against insured directors and executives are covered, before the Spanish jurisdiction and resolved by the same in any part of the world except the United States and Canada and territories under its jurisdiction. However, at the request of the policyholder, the territorial scope may be extended and worldwide coverage may be granted.
Civil Liability Insurance for directors and officers of a company
