Insurance law as it relates to directors
Directors of companies involved in investment management should carefully consider their options in relation insurance.
Most investment managers will hold an ‘Investment Managers Insurance Policy’ – often referred to as an ‘IMI Policy’.
Who should hold an IMI policy?
- Investment Fund managers
- Mortgage Fund managers
- Equity managers
- Fund managers
- Venture Capital Fund managers
- Private Equity Fund managers
- Property Fund managers
- Agriculture Fund managers
- Various Consultants
- Research Houses
What does IMI cover?
Most IMI providers will negotiate the policy with you and will generally offer indemnity coverage for:
- Professional Liability
- Management Liability
- Crime exposures
- Copyright Infringement
- Retired Directors
- Spouses, Heirs, Estates
- Corporate Manslaughter
- Legal Representation
- Emergency Costs
- Pecuniary Penalties
- Pollution Defence Costs
The first and most important consideration in relation to an IMI policy is the wording of the policy document. Generally, an IMI policy document will consist of anywhere between a few pages to a few hundred pages and may include various annexures or other documents.
It is important to take proper advice when considering purchasing IMI insurance.
Exclusions to coverage
Generally, an IMI policy will contain certain exclusions to coverage. It is important to carefully consider these exclusions as in some situations they may reduce the coverage that you are entitled to receive or exclude you from coverage all together.
Typical exclusion clauses include bodily injury, property damage, insolvency, war or terrorism.
Considerations for directors of companies holding an IMI policy
Generally, companies and directors will be covered under an IMI policy for:
- Breach of Directors Duties
- Misstatement or misleading statement
- Dishonesty / Theft
- Counterfeiting / Forgery
- Criminal damages
- Violations of contracts
- Failure to supervise
- Failure to comply with statutory responsibilities
It is important that you obtain proper advice in relation to the any situation that may give rise to a claim.
In the unfortunate event that something happens and you suspect that you may need to claim under your IMI policy, the first thing you should do is review the IMI policy. Each IMI policy is different and will provide the process for making a claim under the policy.
Generally, the process involves notifying the insurance provider as soon as possible after becoming aware of a situation that has or could give rise to a claim. (You should provide full particulars of details including dates, acts and persons involved.)
The insurance provider (usually through their agents or solicitors) will investigate the claim or allegation and determine if the claim is covered by the IMI policy.Depending on the circumstances, you may need to notify various parties (the IMI policy should set out the required parties) as most IMI policies are structured in such a way that coverage is provided by multiple insurance providers on separate layers – often referred to as ‘underwriters’. Insurance providers do this in an attempt to reduce the risk that each insurance provider is exposed to.
Most events that require notification to the IMI policy provider result in:
- Investigation by government bodies or departments
- Court proceedings (civil and / or criminal)
- Actions such as administration and / or bankruptcy
How we can help?
Insurance law involves a complex interplay between policy documents, legislation, case law and a myriad of other considerations.
If you are a director of a company, it is important for you properly understand your insurance policy. We can provide you with advice in relation to any proposed or existing insurance policies.
We are able to assist your business to ensure that you comply with you obligations to best avoid having to claim under an IMI policy or the like.
If you or your company think that you have experienced a situation that you may need to notify your insurance provider of, it is important that you take proper advice in relation to the matter. If you fail to act appropriately, you risk being excluded from indemnity coverage and also expose yourself to liability. We are able to assist you with all matters that your insurance provider may require notification of, and we can ensure that you comply with all appropriate requirements.
We can assist you with every aspect of the insurance claim process and can help you obtain the best results possible.
Here at Ramsden Lawyers our Commercial Law department has the necessary expertise and experience to deal with any Insurance Law matter.
21 Oct 2013