D&O Insurance
Civil Liability Insurance for the administrators and directors of a company. The administrators of companies are exposed to a series of risks due to the breach of legal obligations that many are unaware of. Failure to comply with these obligations entails personal liability for the administrator, so that his personal assets are at stake.
The solution is to take out Directors’ and Officers’ Liability insurance (RC D&O) to protect the personal assets of directors and officers 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 performance of their duties.
But let’s go a little deeper and analyze what kind of liabilities can be imputed to the administrators and directors of a company.
Liability in the commercial field
The liability of directors and officers in the commercial field arises from the breach of the functions and obligations of their position. The director must respond for the damage caused to a third party, to a partner or to the company as a consequence of an unlawful and negligent act or omission.
Liability in insolvency proceedings
In the area of insolvency liability, the law regulates the liability of the administrator who was in office at the time the company entered into insolvency proceedings.
The D&O policy does not interrupt its coverage at the moment in which the Company enters into insolvency proceedings, but maintains coverage for the Directors and Officers until one of these circumstances occurs:
-the declaration of insolvency of the Policyholder
-the resolution agreeing to the substitution of the insured persons in the event of voluntary insolvency of the Policyholder.
-the resolution agreeing to the opening of the liquidation phase of the Policyholder.
Tax liability
The Tax Administration may (without the intervention of a Judge) declare the administrator to be vicariously liable for the payment of debts of the company in the cases established by law.
Responsibility in the workplace
The law does not contemplate a derivation of liability to the administrator in such a specific way, but this liability can be demanded through the laws of a more generic scope. Some examples are the liability derived from unfair dismissals or for mobing complaints by employees.
Criminal liability
The criminal law includes a list of crimes that directly affect the administrators and directors (corporate crimes). If they are criminally convicted, the judge can understand that they must be sentenced, in addition, to the payment of compensation as civil liabilities.
Temporal and Territorial Scope of the D&O insurance policies
It is very important to know the temporal and territorial scope of the insurance.
Temporary Scope: claims filed for the first time against the insured during the term of the insurance for an improper act of the insured director or manager committed during or prior to the term of the insurance (unlimited non-retroactivity) are covered. There are, on the other hand, certain periods (automatic or not) which extend the insurance coverage beyond its termination date, even for life, as in the case of retired persons.
Territorial Scope; in general, coverage is provided for claims filed against insured directors and officers, before the Spanish jurisdiction and resolved by the same anywhere in the world except for 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.
Liability insurance for directors and officers of a company
