Liabilties for Corporate Executives

Overview: Directors’ and officers’ liability is a dynamic area, especially as case law expands its scope and insurance products evolve to meet the changing legal landscape. Risk managers must continually assess the exposure to the corporation and its directors and officers to D&O claims, and be alert to new forms of liability. They must regularly survey the market for D&O insurance to take advantage of product innovations. A total assessment of D&O protection should take into account the following items: 1. A review of the corporate and labor laws of the state of incorporation and any state where the company has substantial business operations, including pending court cases; 2. A review of corporate charter, by-laws, board minutes or other documents that reflect the intended scope of indemnity to be afforded to the company’s directors and officers; 3. An inventory and review of employment agreements with directors, officers, and other employees containing indemnification provisions; and 4. A careful analysis of coverage provided by D&O policies. Risk managers may wish to recommend to senior management that their companies conduct formal assessments of the exposure to personal liability for corporate personnel. Officers responsible for a company’s discrete business operations and geographic units, as well as company counsel, should be assigned responsibility for alerting the risk manager to changes in the business or the law; and the risk manager should regularly inquire about these matters.

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Format: HTML | Date: Jan 2003 | Pages: 1