2023 Indiana Code › Title 27. Insurance › Article 1. Department of Insurance › Chapter 7. General Corporate Powers and Responsibilities of Insurance Companies › 27-1-7-12.5. Directors; Good Faith Discharge of Duties; Liability; Conflict of Interest; Authorization of Unlawful Payments to Shareholders

Sec. 12.5. (a) A director shall, based on facts then known to the director, discharge the duties as a director, including the director's duties as a member of a committee:
(1) in good faith;
(2) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and
(3) in a manner the director reasonably believes to be in the best interests of the corporation.
(b) In discharging the director's duties, a director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
(1) one (1) or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;
(2) legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the person's professional or expert competence; or
(3) a committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence.
(c) A director is not acting in good faith if the director has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (b) unwarranted.
(d) A director may, in considering the best interests of a corporation, consider the effects of any action on shareholders, members, policyholders, agents, employees, suppliers, and customers of the corporation, and the communities in which offices or other facilities of the corporation are located, and any other factors the director considers pertinent.
(e) A director is not liable for any action taken as a director, or any failure to take any action, unless:
(1) the director has breached or failed to perform the duties of the director's office under subsections (a) through (d); and
(2) the breach or failure to perform constitutes willful misconduct or recklessness.
(f) A conflict of interest transaction is a transaction with the corporation in which a director of the corporation has a direct or indirect interest. A conflict of interest transaction is not voidable by the corporation solely because of the director's interest in the transaction if any one (1) of the following is true:
(1) The material facts of the transaction and the director's interest were disclosed or known to the board of directors or a committee of the board of directors and the board of directors or committee authorized, approved, or ratified the transaction.
(2) The material facts of the transaction and the director's interest were disclosed or known to the shareholders entitled to vote and they authorized, approved, or ratified the transaction.
(3) The transaction was fair to the corporation.
(g) For purposes of subsection (f), a director of the corporation has an indirect interest in a transaction if:
(1) another entity in which the director has a material financial interest or in which the director is a general partner is a party to the transaction; or
(2) another entity of which the director is a director, officer, or trustee is a party to the transaction and the transaction is, or is required to be, considered by the board of directors of the corporation.
(h) For purposes of subsection (f)(1), a conflict of interest transaction is authorized, approved, or ratified if it receives the affirmative vote of a majority of the directors on the board of directors (or on the committee) who have no direct or indirect interest in the transaction, but a transaction may not be authorized, approved, or ratified under this section by a single director. If a majority of the directors who have no direct or indirect interest in the transaction vote to authorize, approve, or ratify the transaction, a quorum is present for the purpose of taking action under this section. The presence of, or a vote cast by, a director with a direct or indirect interest in the transaction does not affect the validity of any action taken under subsection (f)(1) if the transaction is otherwise authorized, approved, or ratified as provided in subsection (f)(1).
(i) For purposes of subsection (f)(2), shares owned by or voted under the control of a director who has a direct or indirect interest in the transaction, and shares owned by or voted under the control of an entity described in subsection (g), may be counted in a vote of shareholders to determine whether to authorize, approve, or ratify a conflict of interest transaction.
(j) Subject to subsection (e), a director who votes for or assents to a payment in the form of a dividend or otherwise to the corporation's shareholders made in violation of this article or the articles of incorporation is personally liable to the corporation for the amount of the payment that exceeds what could have been paid without violating this article or the articles of incorporation.
(k) A director held liable for an unlawful payment under subsection (j) is entitled to contribution:
(1) from every other director who voted for or assented to the distribution, subject to subsection (e); and
(2) from each shareholder for the amount the shareholder accepted.
(l) The purchase and holding of a contract of insurance or annuity or a certificate in a group policy by a director does not constitute a conflict of interest.
As added by P.L.266-1987, SEC.4.