Elite directors' and officers' liability from Chubb
Under the name Elite, Chubb offers a directors' and officers' liability cover for organisations with a supervisory board, outside financiers or foreign subsidiaries. The division into insuring clauses determines who is protected under such a policy.
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In brief
In this segment Finass acts as an intermediary through Chubb, among others. The overview of the business range can be found at Chubb's business insurance. Which insurer ultimately writes the policy depends on your size, your governance and your international footprint. The content of your own policy schedule and conditions always takes precedence over what you read here.
With larger organisations a directors' and officers' liability policy is divided into sections. One clause pays directly to the director or supervisory board member where the legal entity cannot or may not indemnify him. The second reimburses the legal entity that has indemnified its directors. A third clause insures the legal entity itself against certain claims, usually around securities. Which clauses appear on your policy is a choice made when it is taken out and not something automatic.
For organisations with a supervisory board, the group of insured persons is the most important point. Supervisory board members are held liable for negligent supervision and rarely have any influence over day-to-day matters. Also include expressly: de facto policymakers, directors of subsidiaries, employees holding a board position at an associated company and people appointed on your behalf to an outside board.
This page deals with one situation. The full overview is on Directors' and officers' liability in a VvE.
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What to look out for
Four subjects that more often make the difference on an extended version than the sum insured does.
Investigation costs before there is a claim
A regulator requesting information, an internal fact-finding investigation or a request for an inquiry before the Enterprise Chamber under Article 2:345 of the Dutch Civil Code already costs money before anyone brings a claim. Whether those costs fall under the policy depends on how the term claim is defined. Without a separate insuring clause for investigation costs, you bear them yourself.
Claims between insured persons
Many policies limit cover for claims brought by one insured person against another, to prevent an internal conflict leading to a payout. That touches precisely on the company's claim against its own director under Article 2:9 of the Dutch Civil Code. Check whether a claim by an insolvency administrator, an administrator in suspension of payments or a former director expressly falls outside that restriction.
Takeover, merger or change of ownership
If control of your business changes, cover for new facts usually stops as at that date and the policy converts into run-off cover for the past. If nothing is agreed about this in the transaction, the selling directors are uninsured after completion for claims about their own period as directors. Arrange the run-off period in the same documents as the sale.
What is not covered even on the extended version
Outside the cover are: intentional or fraudulent conduct, repayable personal gain, fines and penalty payments, claims about injury or property damage and circumstances already known when the policy was taken out. Pure professional errors in services to clients do not belong here either, but on a professional indemnity insurance.
What does your premium depend on?
- Sections chosen: personal cover, indemnification of the legal entity and entity cover
- Size of the group: the number of participating interests and the countries in which they are established
- Supervisory structure: a supervisory board widens the group of insured persons
- Stock exchange listing or bond issue: claims by investors form a risk category of their own
- Investigation costs cover: a separate insuring clause with its own limit
- Excess per section: no excess usually applies to the personal insuring clause
Insurers weigh these details differently. That is where your saving is.
What is covered
| Situation | Personal cover for the director | Cover for the legal entity |
|---|---|---|
| The insolvency administrator holds a former director liable for improper management | Yes | No |
| The company has indemnified its supervisory board member and pays his legal costs on the basis of | No | Yes |
| Bondholders hold the company itself liable for misleading information in an issue | No | Provided that |
| A supervisory board member is criticised for not having blocked a risky acquisition | Yes | No |
| A manager sitting on the board of an associated company on your behalf is held liable there | Provided that | No |
| The Belastingdienst holds a director jointly and severally liable for unpaid wage taxes | Provided that | No |
Which insuring clauses appear on your policy determines whether a claim lands with the person or with the legal entity.
Frequently asked questions
This is what people ask us most.
Why is there a separate insuring clause that pays the director directly?
Because there are situations in which the legal entity may not or cannot indemnify: in a bankruptcy, where indemnification is prohibited by law, or where the legal entity is itself the claimant. That clause then pays the director without the company's involvement, so that defence costs continue to be met even where the company has no money left.
Does a supervisory board of a foundation fall under this too?
If the group of insured persons is defined in that way, yes. Since the Dutch Management and Supervision of Legal Entities Act, supervisory board members at foundations and associations are subject to the same standards on performance of duties and conflicts of interest as in company law. Name the body expressly in the application, because a definition mentioning only supervisory board members of companies can turn out too narrow.
What happens to the defence costs in a large claim?
With this cover, defence costs usually fall within the sum insured rather than on top of it. In lengthy proceedings involving several directors, the amount available can therefore go largely on lawyers before any compensation is paid. So discuss the limit in conjunction with the number of insured persons and the litigation costs to be expected.
Can the policy be extended in the middle of the year?
An increase or extension in principle applies to claims brought and notified afterwards. It will not apply to circumstances you already knew about at that moment. Those remain subject to the old conditions. So arrange an extension before there are any warning signs, not afterwards.
Every situation is different. For these situations we have a separate page.
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