31. Aug 15

Liability of managers: D&O insurance policies on the increase

Executive boards, supervisory boards and managing directors are living dangerously. If the wrong decisions are made, they may be required to stand good for the loss or damage with their private assets.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: A company’s executive bodies are liable in the event of negligent mistakes with their private assets for the resulting loss or damage. They are liable not only for their own mistakes but also those of the employees.

More and more companies are taking out special pecuniary damage liability insurance, so-called D&O insurance policies, for their executive personnel because of this financial risk. Die Welt reports that the number of these special third-party liability insurance policies for executive staff is rising. According to the report, the number of reported cases of loss or damage has also increased. There are two main reasons for this: expectations regarding management have risen and there is also an increasing number of intentional legal disputes, resulting e.g. from a breach of compliance guidelines, owing to the many companies conducting business across national borders.

Due to this financial risk, more and more upcoming managerial staff are attaching evermore importance to a D&O (directors and officers) insurance policy. This special kind of third-party liability insurance can cover losses or damages resulting from internal as well as external liability. In the case of smaller businesses, an insurance policy that only covers external liability, that is to say damages claims by third parties, may be sufficient under certain circumstances.

The demands made on executive personnel in companies vary, which is why D&O insurance should be equally flexibly tailored to particular needs. Among the most important aspects that ought to be borne in mind when taking out a policy are the amount of insurance cover, retroactive coverage, run-off cover and the right to choose one’s own lawyer. Given that the policies are taken out by the companies, one ought to pay special attention to aspects pertaining to internal liability, i.e. the claims by the company against its executive bodies. In order to avoid conflicts of interest, the insurance policy should be designed in such a way that it is fair to both sides.

Lawyers who are experienced in the field of company law can carefully examine the policy and enforce claims should legal disputes emerge with the insurer in the event that loss or damage occurs.

For more informations: https://www.grprainer.com/en/legal-advice/company-law.html

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