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Directors and officers operate in an extremely difficult environment. The fundamental principles governing their conduct have come under increasing judicial and regulatory scrutiny due, in large part, to the visibility of corporate scandals. In 2002, we witnessed the passage of the Sarbanes Oxley Act as well as proposed new regulations from the major stock exchanges intended to improve financial reporting and eliminate abuses in executive behavior. The legal and regulatory changes are expected to improve corporate governance over time but also increase litigation risk for companies that are not in compliance.
Shareholder groups have fomented additional unrest by pressuring corporate management to make swifter changes and improvements to remain economically competitive in the complex world markets. Although there is no single solution for protecting directors and officers from liability, directors and officers (D&O) Liability insurance can be an effective tool in mitigating a firm's overall exposure. Marsh's FINPRO Practice can provide D&O insurance designed to protect a director or officer of a firm for liability due to breaches of duty resulting from negligence, error, or omission.
Directors and officers coverage is typically underwritten on a one-year basis for a single aggregate limit of liability. Many corporations purchase some form of entity coverage or predetermined allocation for securities law claims as a means of avoiding much of the traditional allocation of loss that normally occurred under previous D&O policies. Allocation often resulted in disputes between D&O underwriters and policyholders as to how certain elements of a loss, such as uncovered policies or wrongful acts, should affect the ultimate amount of insurance recovery.
There is little directors and officers can do to diminish the complexity of the business, legal and regulatory environment in which they operate. However, a great deal can be done to protect the personal assets of directors and officers through a combination of strong corporate governance, broad corporate indemnification, and a risk transfer program that includes a high quality D&O liability insurance program.
CONTACTS:
Marsh has D&O leaders in more than 60 countries. If you are looking for a leader in a country that is not listed below, please contact:
United States
Lou Ann Layton
FINPRO United States Practice Leader
New York
212-345-3891
Eugene "Tripp" Sheehan
D&O Practice Leader, FINPRO US
Boston
617-421-0329
United Kingdom
Matthew Rolph
London
44-207-357-3338
France
Guillaume Deschamps
Paris
33-14-134-5040
Argentina
Alejandro "Alex" Guerrero
FINPRO South America
Buenos Aires
(54-114) 320-5928
Australia
Steve Loveday
Sydney
61-28-864-7755
Phillipines
Larie E. Concepcion
Makati City, Philippines
632-755-1021
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Web Site: 2010 U.S. Insurance Market Report
Report: New SEC Risk Management Disclosure Rule Requires Immediate Compliance
Video: Marsh's Lou Ann Layton Talks to Business Insurance About D&O: The leader of our U.S. Financial and Professional Liability Practice discusses how the financial crisis could affect directors and officers liability coverage. Watch the video.
Newsletter: FINPRO Insights, focuses on how recent events, legislation, and trends can affect your financial and professional insurance decisions. Learn more.
How can directors and officers protect their personal assets?
Read our guide, which explains how to reduce personal exposure.
What are the pros and cons of blending D&O and fiduciary programs? Read our report.
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