Taking out a D&O insurance policy is supposed to reduce executives’ risk of liability. Experience shows that it is crucial to pay attention to details when taking out a policy.
Mistakes made by a company’s executive bodies can have serious consequences for the entire business. Managers bear an extremely high level of responsibility for the company they work for and its staff. In addition to this responsibility, executive bodies are also subject to a high risk of personal liability. A lot of companies take out a D&O insurance policy for their executive staff as a way of reducing this risk. If an event covered by the insurance policy occurs, it is nonetheless possible for a dispute with the insurer to emerge if it does not wish to stand good for the loss. Experience shows that the policy ought to be tailored to the individual liability risks faced by a given manager. We at the commercial law firm GRP Rainer Rechtsanwälte note that this is the best way to prevent a legal dispute with the D&O insurance company.
The executive organs attend to different tasks within a company. The more varied these tasks are, the more nuanced the D&O insurance policy should be drafted to ensure optimal coverage of the various liability risks.
Even careless mistakes can give rise to substantial consequences for managers and trigger internal as well as external personal liability. Accordingly, a D&O insurance policy should always cover the risk of both internal and external liability. The coverage agreed, i.e. the insured amount, is, of course, also a matter of vital important.
It is equally important to consider aspects pertaining to coverage of retroactive and follow-up liability alike. In the case of retroactive coverage, the insurer commits to step in even in liability cases that have arisen before the D&O insurance policy was concluded but only came to light afterwards. By contrast, the insurer assumes follow-up liability in liability cases that arose during the term of the policy but were only discovered later on.
Even if the D&O insurance policy covers the key liability risks, it is still always possible in an emergency that the insurer will not want to assume liability in the event of a claim. Lawyers who are experienced in the field of company law can advise companies when taking out a D&O insurance policy and enforce claims against the insurance company.