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What Does Your directors and officers policy Cover?

The Institute of Directors (IoD) is pushing for a reform of directors and
officers insurance
after the recent acquittal of four executives at technology company iSoft.
D&O cover is meant to indemnify directors and officers, but the precedent set by the iSoft trial has the IoD worried. The four iSoft directors, thoughacquitted, had to fund their own legal battles against accusations that they conspired to make misleadingfinancial statements.
Their D&O insurer stated that they had violated the terms of their cover and would not receive defence costs pursuant to their policy. The insurer declined to pay out before hearing an official verdict,
prompting some in the industry to label the insurer’s actions as misrepresentation. Critics attest that there is a need in the industry to ensure that D&O policies are fit to serve their purpose of indemnifying directors and officers.
Critics are pointing to another dangerous precedent: insurers playing ‘judge and jury’ before policyholders actually appear before a judge and jury. The iSoft directors self-funded seven years of legal counsel before their acquittal, but their insurer was initially convinced of their guilt and subsequently refused to provide legal protection.
The IoD cautions that this sort of insurer leeway could burden directors and officers with undue risk, making them responsible for financing their own legal counsel because their insurance does not always provide cover. The IoD is bringing this issue to the forefront because it wants to stop insurers from avoiding paying claims for tenuous, unsupported reasons.
The iSoft directors insist that insurers’ ability to do this not only contributed to their financial losses that spanned seven years, but also caused them to suffer ill health as a result of unrelenting and unforeseen stress.
Do you know what is covered under your D&O policy? Avoid finding yourself in these directors’ position and speak to your insurer to make sure you are completely covered.

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