Page 28: of Marine News Magazine (November 2015)

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INSURANCE

D&O Liability Insurance

Corporate risk now has a human face in an increasingly dif? cult regulatory environment.

By Francis Kean

The regulatory tides have recently reasonably expect a D&O policy to protect them against.

shifted towards holding top manage- For example, a standard expectation is that, if they be- ment more accountable for company come embroiled allegations, investigations, proceedings performance at a time when the insur- or enquiries relating to their capacity as senior maritime ance products which cover the liability executives, the D&O policy would ensure payment of all of directors and of? cers (D&O) are defense and representation expenses, together with any steadily growing in complexity. In this settlements or damage awards made against them, absent new environment, maritime compa- any dishonest or other egregious conduct. The good news

Kean nies’ chief risk of? cers should be keep- is that such expectations can be met, but only if a number ing a keen eye out for the metaphorical of metaphorical and medium-sized coverage ‘icebergs’ are icebergs on the horizon, unless they want to lay themselves ? rst removed from the course being steered. These include: open to accusations of having been rearranging the deck-

HARED OVER chairs on the Titanic as danger neared. S C

One might be forgiven for assuming that cover under

HANGING EA TATES

C S S a D&O policy is primarily for the bene? t of an organi-

Last month (subs: Sept 2015), the US Deputy Attorney zation’s most senior executives. Very often, however, the

General, Sally Yates, issued a memorandum (http://www. de? nition of “director and of? cer” covers all employees, justice.gov/opa/speech/deputy-attorney-general-sally- including those in a managerial and supervisory capac- quillian-yates-delivers-remarks-new-york-university- ity. The breadth of that de? nition in a large organization school) to US assistant attorney generals for anti-trust, tax, could easily cover several hundred individuals and could environment and national security, and all other US States well include, for example, ships masters and of? cers, and

Attorneys, which made clear that corporations could “only perhaps even some crewmembers.

commit crimes through their ? esh-and-blood people.” In itself, that is not a coverage problem, per se. But it is

She went on to say: “It’s only fair that the people who are highly relevant to the question of how much liability cover responsible for committing those crimes be held account- should be purchased. Limits are usually shared on an aggre- able. The public needs to have con? dence that there is one gate and ‘? rst-come-? rst-served’ basis. Following a major system of justice and it applies equally regardless of wheth- shipping incident or disaster, regulators, prosecutors and liti- er that crime occurs on a street corner or in a boardroom.” gants tend to adopt a “bottom up” approach, focusing ? rst

That sentiment just as easily could have been offered on those individuals most obviously implicated in the causes. by a number of lawmakers across the developed world. Senior executives may not come under detailed scrutiny

The memorandum was not limited to criminal acts; it until months or even years later. This may result in inad- also raised the specter of bringing civil proceedings against equate cover remaining for senior executives, if and when executives. Having recently extracted some eye-watering the repercussions rise to their level. ? nes from companies, US prosecutors appear to now have the human element – the recognized cause of most major C M P

LAIMS ADE OLICIES marine accidents – ? rmly in their sights. A key feature of the way in which the liability insurance

A typical D&O policy can easily comprise 30 or 40 pages for directors and of? cers works is that it only responds to of closely typed text, with an equal number of de? ned terms. claims that are ? rst made against them during the period

It is no exaggeration to say that legal advice is often neces- for which the policy is purchased. What this means is that sary to work out precisely what is and what is not covered. Is if the board members of any shipping company are held ac- there a reliable way to cut through this complexity and focus countable for a “wrongful act” committed several years after on what really matters? A good place to start is to establish they have left the company, there will only be cover if the the personal liabilities that senior maritime executives might company has continued to purchase D&O liability insur-

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