31. Mar 17

GRP Rainer Rechtsanwälte: Assessing risk of liability and D&O insurance

By taking out a D&O insurance policy, managers are attempting to reduce their risk of private liability. The risks and the scope of the policy ought to be analysed and reviewed in advance.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Executive boards, supervisory boards, managing directors as well as other executive bodies of a company not only bear a high degree of responsibility, they are also subject to a considerable risk of private liability. Even negligent mistakes can result in them being liable with their personal assets. To reduce this high level of personal risk, many companies therefore conclude a D&O insurance policy for their executive bodies, which is a type of liability insurance for managers. In order to ensure that the insurance coverage is as comprehensive as possible, the risk potential should be analysed in detail and a custom policy taken out that is tailored to the specific risks in question. GRP Rainer Rechtsanwälte can conduct a detailed assessment of the existing risks relating to liability. Based on this analysis, it is possible to determine how extensive the insurance coverage and the insured sum for the D&O insurance policy ought to be.

The executive bodies perform various different tasks within a company and are accordingly subject to different risks. That is why D&O insurance policies should always be tailored to individual requirements and cover the main factors in the event of a claim.

Key points that ought to be considered when taking out a D&O insurance policy are the insured sum as well as retroactive coverage and cover for follow-up liability. Claims based on both internal and external liability should also always be covered.

If the executive bodies breach their duties of care, it is also possible for the company itself to bring claims against them. This risk of internal liability needs to be covered in the policy for the sake of the company’s and the manager’s respective interests. Of course, damages claims can also arise in relation to third parties in addition to internally. To afford protection against claims from third parties, the policy ought to feature an appropriate insured sum and clarify the issue of claims for compensation.

To ensure that a D&O insurance policy provides the greatest level of coverage possible, it is necessary to settle important issues and assess risk factors before concluding the policy. GRP Rechtsanwälte can conduct this assessment and assist its clients in enforcing claims against D&O insurance providers.

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