Managers“ risk of liability and D&O insurance

Managers“ risk of liability and D&O insurance

Managers" risk of liability and D&O insurance

Mistakes made by managers can prove costly both for the company as well as the managers themselves. For this reason, many companies take out D&O insurance policies for their executive personnel.

The executives in a company not only bear considerable responsibility, they can also be held accountable for the mistakes they make and held liable with their private assets. An increasing number of businesses have therefore begun taking out D&O insurance or management liability insurance for their governing entities. The business can benefit from this as well if it personally asserts claims against its executive personnel and the D&O insurance needs to kick in.

The Volkswagen emissions scandal made and still continues to make headlines. Yet matters pertaining to managerial liability are not always sensational cases plastered across all of the media. In insolvency cases, for instance, the company in question or its governing entities may be faced with claims brought by the insolvency administrator. Here, it normally pays off to have concluded a D&O insurance policy, which is why liability insurance for managers has long since ceased to be an issue that only concerns large corporations and is now of interest to a lot medium-sized companies.

There are, of course, also instances where a claim arises but the insurer does not wish to step in. We at the commercial law firm GRP Rainer Rechtsanwälte note, therefore, that one needs to closely examine which circumstances are covered by the insurance when taking out the policy. That is why the individual risk potential ought to be analysed carefully and the policy tailored to specific needs.

Obviously, it is absolutely crucial to consider the insured sum under the policy. It is equally important that claims arising both from internal liability, i.e. claims brought by the company against its executive personnel, and external liability in cases involving claims brought by third parties be covered.

Other essential aspects include retroactive coverage as well as coverage for follow-up liability. In the case of retroactive coverage, the insurer also commits to stand good for circumstances that took place prior to the conclusion of the policy but that were not discovered until later on. With respect to follow-up liability, insurance coverage will also be provided in the event that a claim arises during the term of the policy that is not discovered until afterwards.

All in all, there are a lot of details that one needs to be mindful of when taking out D&O insurance. Lawyers who are experienced in the field of company law can advise businesses and their managers.

https://www.grprainer.com/en/legal-advice/company-law/do-insurance.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

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