A director or officer of a company has personal liability from shareholders, employees and various regulatory authorities. Get protection from Directors & Officers Insurance for errors or omissions.

What Are The Responsibilities of Corporate Boards?

Directors of corporate boards have many duties and responsibilities. The board of directors of a corporation generally performs the following duties:

• Review & authorize major corporate actions
• Advise & counsel management on corporate decisions
• Review & oversee proper audit procedures
• Review the Cooperation’s investments
• Stay informed about the Corporation’s financial status and legal developments
• Assist management in decision-making
• Verify the Corporation is in compliance with all applicable statutes, regulations & laws
• Monitor management’s performance

Directors & Officers of corporations are responsible for the affairs of their companies. They must use good faith and prudent judgment in their service to the corporation. Directors & Officers have certain duties and responsibilities when acting in the service of the corporation. These duties are as follows:

General Duties:
Directors & Officers must act in good faith and prudent judgment in their service to the cooperation.

Common Law Duties:
The following are the common law duties:

• Duty of Loyalty:
  Directors & Officers must avoid conflicts of interest, self-dealing, and misuse of corporate assets


• Duty of Obedience:
  Directors & Officers must act within the boundaries established by statute, corporate charter or by-laws, and written policies and procedures


• Duty of Diligence and Care:
  Directors & Officers must conduct themselves with the care that an ordinary person would exercise under similar circumstances and in similar capacities


• Statutory Duties:
  There are several laws and statutes that regulate the actions and decisions of Directors & Officers
  • Securities Laws
  • Anti-Trust Laws
  • Employment Laws
  • ERISA Violations
  • Racketeering Laws
  • Tax Laws
  • Environmental Laws
  • Intellectual Property & Patent Laws

Directors & Officers Liability is the liability (or exposure to litigation) of corporate board members and officers arising out of their actions pertaining to their management duties of the corporation. Directors & Officers Liability Insurance insures the personal assets of corporate board members and officers [as well as the company’s corporate assets] from lawsuits arising out of their capacity as directors or officers of the cooperation.



State Corporation Laws
Business Judgment Rule – Directors & Officers have historically been protected from personal liability against them by a legal principal known as the Business Judgment Rule. This legal principal shields corporate directors & officers by applying the rule for mistakes in judgment (i.e. second-guessing). As long as the director or officers has acted according to the duties of loyalty, obedience and diligence, then the director or officer may be protected by the Business Judgment Rule.

Directors & Officers Liability Claims
Directors & Officers of both Public and Private Companies face legal liabilities in their service to the corporation. The claims experience between the two varies. Public Companies experience more frequency and severity of claims related to shareholder issues, while both Public and Private Companies face similar experience for Employment Related Claims. Below is a partial list of typical claimants:

• Shareholders
• Employees
• Creditors
• Customers/Clients
• Competitors
• Government Regulatory Agencies

There are three categories of protection against personal liability of Directors & Officers of corporations:

1. Indemnification
The corporation may indemnify their directors & officers for litigation. This is usually accomplished by incorporating an indemnification clause in the corporate by-laws or by a separate written indemnification agreement. Indemnification is also often available and governed through state law. Some conduct by the directors & officers is not indefinable, such as dishonest/illegal acts or intentional misconduct. Indemnification may not be available to directors & officers in cases of financial insolvency or bankruptcy.

2. Common Law and Statute
Business Judgment Rule:
Courts may apply the Business Judgment Rule to protect directors & officers from personal liability.

3. Liability-Limiting Statutes:
Some state and federal laws provide limitation of liability in certain cases.

Insurance Coverage

Insurance provides protection for individual directors & officers when the corporation is not permitted to indemnify or financially unable to indemnify the directors & officers.

When the corporation does indemnify, D&O insurance will Pay On Behalf Of or indemnify the corporation for payments made to the directors & officers. In some cases, coverage may be provided for the corporate entity, in cases where the corporation is being held liable. D&O insurance provides Balance Sheet Protection for the corporation. Insurance allows the corporation to transfer risk from its own balance sheet to that of the insurer.

D&O insurance helps the corporation attract and retain quality board members.

Important Exclusions

• Loss bought about or contributed to by any fraud, dishonesty or malicious conduct of the directors or officers
• Loss based upon or attributable to the directors gaining any profit or advantage or receiving any remuneration to which he is not legally entitled

This insurance offers protection against adverse third party claims on the title where Allianz will step into compensate for the loss suffered.

Products of Title Insurance

Mortgagor’s Policy
Cover is available for Bank or other lending institution on the title of a prospective buyer to a particular land at the request of the said Bank or Institution.

Owner’s Policy
Cover is available for the owner of a land who would like to protect his rights and secure the same.

Title Insurance Certificates
Some Banks prefer to get a title insurance certificate first when a prospective borrower is unable to get the Valuation Report and in such instances Title Insurance Certificate is issued at a nominal price and once Valuation Report is produced, the Policy will be issued according to the said ratings.

Documents To Be Submitted for Title Insurance

• Deeds which conferred Title of the land proposed to be mortgaged to the applicant / borrower or its present owner
• Plan depicting the land to be mortgaged and its connected plans
• Certified copies of extracts folios taken within six months
• Valuation report
• Local authority certificates
  1. Non vesting certificate
  2. Building lines and / or street lines certificate
• Title report

The contract covers the insured (policyholder) against the risk of not being paid by clients (buyers). The contract specifies which risks are covered and excludes, typically, secured transactions, consumer credit, inter-company transactions and long-term risk. In case an insured buyer has not paid after a certain period ("waiting period") we pay up to 90% of the insured debt to the policyholder.

The Risks Covered

• Commercial
  Insolvency (liquidation, official insolvency and the equivalent concepts)


• Protracted Default
  The mere fact that a buyer has not paid at the end of a "waiting period" (usually 6 months after due date)


• Political Risk
  Public buyers (governmental bodies and institutions that are not registered as private legal entities)


• War, riots etc.


• Transfer risk (non-payment caused by a governmental action, e.g. restrictions on payments in hard currency or import restrictions). These are risks that can be covered under the policy. The extent to which they are valid in a specific contract is detailed in the schedule


• Performance risk (non-payment due to the failure of the policyholder to meet his obligations) and non-acceptance are not covered

Standard Cancellation and Abandonment of Events which includes indemnity to the Insured in respect of actual financial loss sustained by the Insured on account of loss of irrecoverable expenses and loss of Revenues as evidenced by audited Accounts to be furnished by the insured and duly verified by the Company’s Authorized Representative due to cancellation and / or abandonment of the event, as caused by;

• Riot and strike at the vicinity or within
• Actual terrorist bomb blast in two kilometre radius
• Death of the Head of State of Sri Lanka
• Curfew imposed by the Sri Lankan Government exceeding 24 hours