Governing corporate bodies such as executive boards, executive directors or supervisory boards are liable for careless mistakes with their private assets. D&O insurance is meant to afford protection against any claims.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: The governing bodies of a company (executive boards, executive directors, supervisory boards) bear a great responsibility and can have actions raised against them even if merely careless mistakes are made in managing the company if they have breached their required duty of care. If this occurs then they are liable without limitation with their private assets. In order to protect them against damages claims, companies can take out D&O insurance (directors and officers). This is a type of pecuniary damage liability insurance for executives.
That being said, the duties performed by executive boards, executive directors or supervisory boards within a company are different in nature. D&O insurance should therefore be individually tailored to the respective individual and their risk and cover the key factors in the event of damage or loss.
In order to guarantee this personal protection, the content and scope of the D&O insurance policy ought to be carefully drawn up, for instance, concerning issues pertaining to the insured sum, retroactive coverage or run-off insurance. The policy must safeguard the governing bodies against internal and external liability risks.
Internal liability can be a precarious matter because it concerns claims made by the company against its governing bodies. These claims can arise from the misconduct of a governing body in its management of the company through act or omission. While D&O insurance is meant to protect the governing bodies against these claims, it is the company that takes it out. For this reason, the policy ought to be carefully reviewed to ensure both sides are satisfied. External liability concerns damages claims by third parties outside of the company. Issues regarding coverage and recourse thus need to be clarified within the framework of the policy. Insurance covering the costs of criminal proceedings should also be included in case of a criminal trial.
The D&O insurance policy should therefore be very accurately and carefully prepared to ensure that it does in fact afford protection against all conceivable types of damage and loss. Of course, if loss or damage occurs then it is also possible that the insurer will refuse to indemnify. That is why it is advisable from the outset to consult lawyers experienced in the field of company law who are able to thoroughly assess the policy and enforce claims.
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