Part III of the TressCox 2012 Insurance Seminar Series held in Sydney on 24 July 2012 and Melbourne on 26 July 2012, saw TressCox Partner Michael Bracken, a specialist in Financial Services and Corporate Risk, Senior Associate Sarah Wheeler, and Associate Levina Chim, discuss some new insights to help Directors improve the structure of their D&O cover.
Our TressCox panel highlighted some recent Court decisions which may change the shape of Director accountabilities. Michael and Sarah discussed the recent Federal Court decision of Centro and the High Court decision of James Hardie, both of which reinforce the responsibilities that Directors must face when they sit on a Board particularly their financial acumen and the limits on reliance on management.
Sarah raised issues about the impact of the New Zealand High Court decision in Bridgecorp where claimants asserted a charge over all of the available insurance moneys under the D&O policy and prevented the insurer from advancing defence costs to the directors to fund their defence. This concern has yet to be resolved by an Australian court.
Levina and Michael explored recent statutory changes under the Consumer Law and examined changes to proportionate liability and looked at the implications of new penalties and their impact on Directors.
Our panel strongly recommended that Directors should review their D&O cover and also consider each component of their primary cover to assess whether liability and risk they encounter in their particular industry may potentially exhaust cover for a Director under each of Side A,B or C of the primary policy.
Michael highlighted the fact that Directors of large public companies are increasingly requiring Stand Alone Side A coverage as a condition of serving on boards, and that ‘Stand Alone Side A Cover’ may help to overcome some of the limitations.
Directors need to consider a range of issues when arranging D&O insurance, including whether their own individual position is protected and how they are sharing their indemnity limits with the corporate balance sheet.
We had very interactive sessions with our audience in both cities. Some of the more pertinent questions were:
- Does a director need to record any material concerns in the minutes of a board meeting?
- How is director coverage under a D&O policy affected by the appointment of a liquidator to the company?
- How do the new prohibitions on a company indemnifying a director for penalties under the Consumer Law affect D&O insurance cover?
- Can a Director structure their D&O to prevent a Bridgecorp situation?
Please join us for Part IV of the TressCox Insurance Seminar Series which will be presented by TressCox Senior Associate, Marini Mann. The presentation will focus on the issues surrounding Non-Disclosure and recent Court decisions. The seminar will take place in Sydney on 25 September 2012 and Melbourne on 27 September 2012.