RISK MANAGEMENT FOR DIRECTORS & OFFICERS
Decision makers today must be adamant about best protecting themselves and their organization from liabilities that could cripple their organization. Being in a top decision making role requires specialized focus on the exposures that face Directors and Officers. This is because uncovered or underinsured losses not only harm the individual(s), but also may devastate the organization as a result. In some situations, upper management may be under the impression that their personal assets are automatically separated from the organization’s assets, but this is not always the case.
Therefore, identification of exposures to Directors and Officers liability is paramount, including the assessment of an organization’s bylaws, personnel conduct and operational agreements. This is for aligning the organization’s operational segments, counsel and decision makers, with risk management strategies to protect against critical liability exposures.
In amending the corporation’s by-laws, instituting procedures and controls and implementing them, care has to be exercised to ensure that these are congruent with the conditions of the corporation’s D & O Liability Policies.
ICA provides experienced advice on how coverage for the corporation and its directors and officers has been changed in response to these proposed changes.
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See Below for How It Works:
Reviewing the Client’s bylaws as they relate to indemnification of directors & officers.
ICA reviews individual indemnification agreements with directors & officers – a specimen form if a standard format is used, or each indemnification agreement individually if they are not on a standard format. This also includes reviewing the applicable state’s laws relating to indemnification, punitive damages, etc., relative to the bylaws and the indemnification agreements.
Reviewing the Client’s Directors & Officers Liability policies and advising on inconsistencies between the policies and the bylaws/indemnification agreements comes next, followed by a review of Sarbanes-Oxley and SEC rules promulgated thereunder vis-a-vis the Client’s Directors & Officers Liability Policies and advising on potential scope and/or lack of insurance coverage for potential/probable causes of actions likely to arise from the implementation of the Act and the SEC rules.
ICA advises Clients on insurance coverages and alternatives available to address specific exposures and Issues. These coverage and issues include independent directors, audit committee, Side A coverage, entity coverage, order of payments, specific policy exclusions, severability, restatement, etc. ICA then provides benchmarks and other comparative information for the Client’s choice of Directors & Officers Liability Policy limits, retentions, combination of coverages and insurance companies. Finally ICA advises the Client on developments in the directors & officers liability insurance marketplace. This includes newly evolving policy forms and endorsements, impact of ongoing SEC rule promulgation on directors & officers liability insurance coverage and other matters of concern (from a risk management and insurance perspective) to the Client’s directors and officers.