Household Name Appliance Company Seeks Advice as To How the Sarbanes-Oxley Act Affects Their D&O Policy

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Household Name Appliance Company Seeks Advice as To How the Sarbanes-Oxley Act Affects Their D&O Policy

After the passage of the Sarbanes-Oxley Act, this Client, knew that it had to address all the new reporting issues required by the Act. Their accountants were quite helpful from the accounting perspective, yet the Client had little understanding as to how the Act would interact with their Directors and Officers Liability Policy. ICA, who had carefully analyzed how the new legislation affects the D&O exposure, was asked to help the Client sort through what they needed to address with the D&O underwriters with respect to their current policy and to prepare them for their next renewal. ICA pointed out areas of coverage specifically affected by the Act, including the D&O Policy’s “awareness”, “knowledge”, and “severability” limitations, as well as the “personal conduct” exclusions. These insurance clauses can limit the protection that a Director or Officer can expect from a D&O Policy, particularly in light of the many malfeasances which are imputed to a Corporate Executive under the Act. ICA helped guide the Client through revisions and synchronization of their Corporate Indemnification Agreements and their By-Laws to their D&O Policy. By doing so, the potential for recovery under the D&O policy for actions brought against Board Members and Corporate Executives was maximized.
Once again, ICA assured that this Client dotted their “i’s” and crossed their “t’s” properly with regard to D&O and the Sarbanes-Oxley Act. Before ICA’s involvement, the Client was planning on leaving the D&O Policy alone, despite the passage of the Act. ICA advised that if they had not addressed these corporate documents and if the Client had faced a claim against their Directors or Officers, the chances for complete indemnification and coverage would have been much slimmer.” See our Risk Assessment Service for Directors & Officers.

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