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Can a D & O claim against an independent director?

QuestionsCategory: Directors & Officers Liability InsuranceCan a D & O claim against an independent director?
default avatarPlan Cover Staff asked 3 years ago
1 Answers

Best Answer

default avatarSrinivasan Mahadevan answered 3 years ago
D&O liability insurance affords protection to directors and officers from liability arising from actions connected to their corporate responsibilities. The policy provides indemnity to the directors and officers in respect of:

  • Legal costs in defending proceedings brought against them alleging wrongful acts.
  • Any damages awarded to the claimants against the Directors and Officers, including out of court settlements.

The policy not only covers current, past and future directors but also covers independent directors in the policy. The liability of an independent director is under Sec 149(12) of The Companies Act
Independent directors can be questioned not only for errors of commission and omission but also for passive negligence. If any independent director has attended or participated in board meetings or has merely received minutes of such meetings and has failed to record his or her concerns or objections, then such an independent director cannot escape prosecution claiming that decision was not taken with his concurrence and knowledge. 
Typically independent directors are provided special excess protection limits in the d&o liability insurance policy. This limit is offered over and above the limit of the policy.