LIABILTY INSURANCE FOR DIRECTORS OF COMPANIES
A waste of money?
Under the laws of the Netherlands Antilles and Aruba, directors of companies can be held liable if they are engaged in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law. In principle, such directors cannot be held personally liable for ordinary negligence or ordinary mistakes. Directors liability insurance provides financial protection for the director of an company in the event he is sued in conjunction with the performance of his company related duties.
Given the scope of the customary coverage exclusions, the question is whether a director needs any liability insurance at all. Some fear that being insured is even an invitation to others to file a suit too easily.
Whether or not liability insurance is a waste of money depends on several things, including:
- the costs of such insurance (the premiums)
- the nature of company: is it operating local or international (cross-border), is it listed or privately hold (and by whom?), does the company operate in a difficult and risky environment, etcetera.
- the scope of the coverage as well as the exclusions (e.g. the insurer may or may not agree to pay the defense costs for a director up until the point he is found guilty of fraud)
- the insured amount
Do you have any personal experience in this respect? I invite you to share your views with us on the weblog’s forum.
Karel Frielink
Attorney (Lawyer) / Partner
