Many directors may find they do not have the time to master all the details, and may rely on management to recommend the most appropriate course of action. This article, by Chris Jurgeleit and Geof Shirtcliffe of Chapman Tripp Sheffield Young, explains some of the issues directors should ask management to consider. The new rules concern insurance and indemnities relating to liability for acts or omissions as directors. They do not apply to other things, such as indemnity for damage to a director's personal property while on company business. This article concerns only indemnities and insurance dealt with by the new rules only.
Companies generally take out two separate policies for directors' liability.
The first is the Company Reimbursement Policy, which insures the company against liability it may have to directors under any indemnities it has given to them. Generally, companies purchase two policies together, carrying the excess solely on the Company Reimbursement Policy. Typically, the two policies together protect directors from personal liability for errors, misleading statements, mis-statements, negligence and breaches of duty, and for associated legal costs. Not all liability is covered. Pollution-related claims, personal injury and property damage claims, claims resulting from a director's dishonesty and liability for fines and penalties are common exclusions.