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Home Insurance Company in South Carolina

When shopping for home insurance quotes, there is a lot more to consider than how much your coverage will cost. It is important to buy the right type of policy from a solid home insurance company. Make sure you choose the proper level of protection that includes special provisions for valuables such as jewelry, computers and other valuables. Also, depending on where your home is located, you may need to include coverage for floods or earthquakes.

As soon as you start shopping for home insurance quotes for your home in South Carolina, it is important to research your policy and understand what you are getting with that policy. Homeowners insurance is designed to protect South Carolina home owners against certain hazards. Normally there is a deductible that will need to be met when you file a home insurance claim unless otherwise noted. Homeowner's insurance policies are determined by the potential dangers to your home and it is important to understand what is covered in your home insurance policy.

How Much Home Insurance do you Need?

Many home insurance companies use a cost estimator to figure home insurance quotes. This will ensure that your home is insured for the right amount. Home insurance companies do not insure dirt, so if you purchase a home on a large lot, do not be discouraged when your home insurance policy is a lot less than what you paid for the home. You are buying coverage for the home and not the land.

Home Insurance Rates

Your home insurance deductible is the amount you pay for covered damage before your insurance begins coverage. You can choose a higher deductible in order to lower your home insurance rates and premiums as long as you are comfortable with the added risk. Ask your home insurance company to give you home insurance quotes for a range of deductibles to see how much you could save on your premiums.

Determine Your Insurability

Your home insurance company will need extensive information form you to provide you home insurance quotes and be able to give you the best home insurance rates for your policy. To determine insurability, your home insurance company could ask:

•When was your home built?


•How old is the plumbing and electrical?


•What type of roof is on your home?


•What is the square footage of your home?


•How many claims have you filed over the last 5 years?


•Where is the home located?
If your home is located in a rural area without a nearby fire department or no near fire hydrant then the home insurance company may refuse to insure it. If this happens to you, contact a specialty or surplus-line company, but remember that this home insurance quote will take longer to obtain.



How to Lower your Home Insurance Rates

The more secure your home is the lower your home insurance rates can be. It is recommended to install security alarms and deadbolt locks on all exterior doors and secure locks on all windows. Once you have a security alarm installed, be sure to sign-up for a home monitoring service that will constantly monitor your home and send the needed help in the event of an emergency. Having a monitoring service can dramatically lower your home insurance rates.

Another great way to lower your home insurance rates is inquire about insuring other policies with your home insurance company. For example, if you insure your vehicles, motorcycle, boat, health insurance, etc., you could qualify for a discount for having multiple policies with the same insurance company.

Home Insurance Coverage

Home insurance companies and lending institutions normally require mortgage customers to purchase homeowners insurance. Do not depend on the coverage levels required by your mortgage lender. Those mandated levels are designed to protect the home itself, but not always your possessions. That's why it is important to check with your home insurance company when shopping for home insurance quotes and rates to ensure that you have adequate coverage.

How to Save Money

There are easy ways to save money on your home insurance rates.

•Shop around - searching of for home insurance quotes online is a great way to compare policies. Some websites enable you to fill out one form and you can receive multiple homeowners insurance quotes from submitting one form.


•Raise your deductibles - the higher your deductible normally means the lower your monthly premiums will be.


•Keep your credit report clean - many home owner's insurance companies will base your insurance quote on your credit report rating. Higher credit scores could net lower home owner premiums.


•Stay with the same insurance company - some home insurance companies will offer their customers special discounts for being a long-term policy holder.


•Use one company for all of your insurance needs - you can receive deep discounts for using the same insurance company for multiple insurance policies. For example, if you use the same company for home and auto insurance you could qualify for a discount.


•Don't smoke - non-smokers could obtain lower home insurance rates because a percentage of house fires are caused from cigarettes.


•Install a home security system - having a home security system could qualify you for a discount on your home owner's insurance policy. Homes with security systems are less likely to become burglarized.


•Ask for discounts - be sure to ask your insurance agent if there are any discounts you could qualify for.


•Review your policy annually - your home insurance needs could change over time and it is important to review your policy regularly. Sometimes you may not need as much coverage and that could cause your premiums to go down.


Shop Around

Get home insurance quotes from several home insurance companies when shopping for home owners insurance. Remember, the lowest home insurance rate or quote does not always equal the best deal. Be sure to compare the coverage each home owners insurance policy offers, also, be sure to investigate that the home insurance company you are interested in has a good reputation in the industry.

Every home insurance quote could be different from each home insurance company, even from the same company. That's why it is important for you to get several home insurance quotes before you make a decision. It is a good idea to go with a home insurance company that allows you to have the same home insurance rate forever, so you do not have to worry about your home insurance rates increasing.

An easy way to get several home insurance quotes fast is to jump online and browse different home insurance company websites. These home insurance companies have user friendly websites and include free quote systems that normally take about five to ten minutes to complete and often times you can compare several companies' home insurance quotes.

In addition to obtaining several home insurance quotes quickly, you can educate yourself regarding the many different types of homeowners insurance policies out there and how much the home insurance rates should cost.

Home Insurance QuotesHome Insurance CompanyHome Insurance Rates

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Insurance Marketing: Creating a Successful Marketing Strategy for the Insurance Industry in Sierra Leone

OVERVIEW:

A common perception about insurance in most African countries is that carriers generally fail to honor policy contracts when insured losses occur, and in most cases resort to fine prints embedded in these insurance contracts to either deny claims or substantially reduce claim payments. Such is the refrain heard not only among insurance policyholders and customers but with alarming regularity from the general public, thus resulting in the adverse and low penetration rate of insurance products and services in most African countries.

Though several factors can be readily identified as drivers of this perception including the lack of adequate understanding of the insurance contract, its terms and conditions, limitations, coverages, exclusions and deductibles including the legal and regulatory framework in various countries; the focus of this article is how the role of insurance marketing and sales, including its technological, regulatory and management strategies, can be utilized as an effective educational vehicle in changing not only the above perception but making the claims process more transparent and beneficial to the policyholders.

There is thus a direct corollary between the marketing of insurance, the technical knowledge of the agent, the types of coverages and policies available and whether a claim is denied or underpaid in the event of an insured loss.


THE SIERRA LEONE CASE STUDY:



For decades the marketing of insurance products and services in Sierra Leone has hinged primarily on the “direct agency” method, wherein companies employed agents earning salaries or as independent contractors being paid commissions on sales to merely sell and market their products. The marketing of life insurance products, property and liability policies such as fire, marine, accident and allied policies were always mostly marketed by these company agents.

For example, while I was employed at the National Insurance Company (NIC) 1981-1985, the company’s sales cadre was its marketing officers who sometimes with little or no technical knowledge of the intricacies of risk management and the insurance products coverages merely sold policies as commodities. The unpleasant task most often in advising policyholders that their claims were not covered under the terms of the insurance contract generally was our responsibility in the claims department. By then, it had become too late to remedy as the right coverage was not either sold to the policyholder by the agents or alternative umbrella policies that could have covered whatever gaps existed in the sold policy were not made available or explained to the policyholder. Mostly issues of lack of coverage, adequacy of coverage for the losses claimed resulted in denial or underpayment of claims.

The sales function of these agents revolved mainly around the marketing of products or policies with little or no product differentiation or creativity in their design and marketing to meet the contemporary risks confronting a country such as Sierra Leone, emerging from a decade long civil war and longing for creative policies to address her developmental aspirations.

For example, the old “Kebbay” insurance syndrome, practiced in Sierra Leone where an insurance company became so notorious in the practice of collection of motor premiums from customers without any concomitant claims payout when accidents occurred. Such a practice as prevalent in the Sierra Leone Insurance marketplace of the 1970’s through 1990’s most be prevented from rearing its ugly head in today’s marketplace.

Marketing as defined by the American Marketing Association (AMA), is the performance of business activities that direct the flow of goods and services from the producer to the ultimate consumer. Property, casualty and liability insurance marketing however not only includes the traditional marketing sales function but incorporates services such as customer needs analysis, market segmentation, product development and distribution that must be incorporated into a successful marketing mix.

INSURANCE MARKETING:

A fundamental principle of insurance marketing dictates that insurance products and policies must be marketed and sold primarily on the basis of the need for security and the ability of the insurance product and policy to provide adequate financial security from fortuitous losses. Moreover, new sources of production of business that includes new ways of selling old traditional insurance policies and products, in conjunction with the marketing of new services, such as risk management, loss control and loss adjustment services should be pursued by insurance companies.

However, in some lines of insurance, a governmental-legal or regulatory compulsion to insure is the driving factor. For example, purchase of automobile liability insurance is required by law in most jurisdictions the world over. The recently advocated proposed requirement of a title insurance policy in real estate transactions in Sierra Leone and a national health insurance or workers compensation insurance policy are all examples of such a legal mandatory requirement.

To a large extent these have and continue to be the principles and services absent in the marketing mix of insurance products in Sierra Leone, thus resulting in recent spectacular failures in the introduction of new products and or failures in the market penetration of various new diverse policies into the insurance marketplace. As an example, the failure of various insurance companies including the spectacular failure of the country’s largest insurance company, the National Insurance Company (NIC) to effectively introduce and market a national health insurance policy (NICARE) since 2004 is a case study of a monumental marketing failure requiring analysis in a future article.


THE SALES FUNCTION:



To be successful however an insurance producer/agent must develop other skills in addition to the sales skills to include:

1) Technical expertise in insurance principles and coverages- as customers usually depend on their agents for guidance in selecting the proper combination of insurance products and identification of gaps in coverages.

2) Skills in the analysis of consumer needs through risk management identification techniques and the tailoring of insurance programs are a prerequisite.

The first step in managing a consumer’s risk needs is through the identification and analysis of the loss exposures to which a customer is exposed or subjected to through an insurance survey. The agent must educate and be able to impact sufficient knowledge of the client’s loss exposures and available coverages and other non-insurance transfer mechanisms to the customer.


SALES MANAGEMENT:



Generally, the concept of sales management in insurance involves the active participation and direction accorded the sales force by management in ensuring the nature and amount of business desired by the insurance carrier. This entails the determination by management of:

1) The segments of the available market that can be reached most effectively by the company’s agents.

2) The nature of the product/policy that will be most appealing to the selected market segments and most profitable to the insurer.

3) How best to select, train and motivate producers/agents to sell to the selected market segments.

The selection of geographic, demographic and or industrial segments of the market to target in the marketing of insurance products ensures effective market segmentation and effective use of resources. The demographic groupings may be further delineated by such characteristics as age, income, occupation and sex.

With the utilization of such a technique for example, diverse insurance policy coverages covering health, medical, accident, disability and workers compensation to name but a few, could be tailored and offered to such segments as civil servants, parliamentarians, teachers, college lecturers, healthcare providers, Okada riders and farmers throughout the country. The same could apply to the security segment including policies specifically designed to meet the needs of the military and police forces.

Moreover, through utilization of product differentiation techniques in its marketing mix, an insurance carrier can maintain and increase its market share. These can be accomplished by changing the standard coverage provisions in the contract; charging a different price and by providing a different level of service than the competition.

TECHNOLOGIES:

With the gradual installation of computers in insurance companies in Sierra Leone, new technologies are poised to play a major role in the coordination of marketing strategies, planning and studies including new products and services, consumer attitudes, market potentials and sales forecasting. The use of computers for not only accounting, statistical analysis and rate making and issuance of policies and endorsements but also insurance marketing must be vigorously pursued by individual companies.


The establishment of a marketing database by insurance companies separate and apart from the underwriting and claims databases must a step in the right direction in implementation the new marketing strategy.


MARKETING CHALLENGES:



The challenge thus facing the local industry is the need for diversification of insurance products better tailored and suited to meet the needs and development of the country. For while the insurance industry can play a very significant and critical role in a nation’s developmental process, the challenge currently being faced is how our insurance professionals respond by creatively introducing insurance policies, instruments and marketing techniques to serve as a basis for the country’s sustained economic development.

In the United States there are four distinguishable systems for marketing property and liability insurance. These include:

Independent agency system.

The exclusive agency system (also known as the captive agency system).

The direct writing system.

The direct mail system.

The system primarily in use in the Sierra Leone insurance market is the direct writing system wherein individual carriers employ their paid agents and employees to exclusively market only their policies. However, if the insurance market in Sierra Leone is to survive and grow, as new players and products such as the national health insurance scheme and the national title insurance scheme are introduced into the marketplace, then the development of a new bred of producers, agents and marketing systems must be pursued to forestall the failures of recent new policy introductions. These must include and incorporate the direct mail, agency and technology systems.

To effectuate this new marketing goal a sales force must be recruited and trained into the intricacies of the insurance business and policies being introduced and marketed with realistic production objectives, marketing policies and strategies and implementation of an advertisement and promotion campaign.

The author, Mr. Kortor Kamara has over 25 years experience in the insurance industry both in Sierra Leone and the United States. He is a Chartered Property & Casualty Insurer and holds the Workers Compensation Claims Professional (WCCP) designation. He is a Member of the Chartered Insurance Institute (London); Certified Self-Insurance Claims Administrator-State of California; Registered World Bank Consultant and has served as a Consultant on various Insurance initiatives in Sierra Leone, including design of the country’s first Title Insurance Policy. In addition, Mr. Kamara is a graduate of Fourah Bay College, University of Sierra Leone, 1978-1981; studied Law at both the Univerisity of West Los Angeles School of Law and the California Southern School of Law in Riverside. He is currently a Doctoral Candidate in Insurance and Risk Management. Through association with Saddleback Re, were he serves as the Regional Manager, Africa Division, Mr. Kamara is intimately involved in the provision of reinsurance coverage, policy design, loss control, training and risk management services to the African Insurance marketplace. Mr. Kamara can be contacted at KortorKamara@yahoo.com.www.saddlebackre.com.

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Take Your Time When Exploring Life Insurance Options

Life insurance can be a tricky form of insurance to purchase. There are two quite different types of life insurance and multiple ways a life insurance policy can be purchased. This complexity basically demands the buyer to do some background research, and carefully compare life insurance quotes. Life insurance is not one-size-fits-all and when comparing life insurance you want to make certain you are comparing apples-to-apples to get the best low cost life insurance.

Life insurance is also different from other forms of insurance in that you are insuring a life and not an object. Life insurance can be a major aspect of your financial planning and strategy, and some policies offer more than simple death benefit protection.

Term Life insurance versus Permanent Life Insurance

Term life insurance and permanent life insurance is the starting point when looking for life insurance. Keep in mind these two basic life insurance categories are very different and life insurance policies can combine benefits or even change from one type of life insurance to another type of life insurance at some point. Term life insurance in its simplest form is life insurance coverage a set period of time – the "term." Your beneficiaries are paid a death benefit only if you die during the term. Keep in mind term life insurance does not usually build up a cash value, but at the same it typically offers lower premiums in the early years of the life insurance policy.

Premiums do rise with term life insurance as you renew terms. Often you can renew your term life insurance policy, even with a health change, but expect to pay a higher premium. Questions to ask when comparing term life insurance include if there’s an age limit to renewing the policy, and if renewal of your term life insurance policy starts requiring a physical examination at some point.

The second major type of life insurance policy is permanent life insurance. Permanent life insurance comes in a number of types including universal life insurance, variable universal life insurance, and whole life insurance. The key difference between permanent life insurance and term life insurance is permanent life insurance policies offer long-term financial protection. Premiums are usually higher, but permanent life insurance includes a death benefit and very likely a cash savings.

Individual Life Insurance, Group Life Insurance and Credit Life Insurance Policies

The next set of choices to tackle is how to actually buy your life insurance policy – as an individual or as part of a group. Individual life insurance gives you the most control over your policy. You make every decision for the life insurance policy, such as choosing the life insurance company, the actual life insurance plan and the life insurance policy features to customize the life insurance plan for you and your family’s needs.

There are a number of ways of buying an individual life insurance policy, but it is commonly done through insurance agents or insurance brokers. Any individual life insurance policy will include fees or commissions, with the usual commission in the form of a “load” figured into the life insurance premium rate.

With a group life insurance policy you most likely be automatically insured by your employer, often with an option to add to that insurance under the group policy. Most group life insurance provided by an employer is term life insurance, and it does have some advantages. The rate is often lower than for individual life insurance, you likely receive the life insurance without any health qualifications, and the payment usually comes in the form of a payroll deduction which helps ensure you don’t miss a life insurance premium payment.

With all these options in types of life insurance policies and how to buy the life insurance products, it’s easy to see how important comparing life insurance possibilities and doing your background research is before actually buying life insurance.

One final type of life insurance above and beyond the life insurance options listed above is credit life insurance. This life insurance comes from lending institutions and credit card issuers, and will pay off your outstanding loans as a death benefit. Sometimes credit life insurance is built into the loan and other times life insurance can be offered as an option as part of your credit agreement.

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Directors And Officers Liability Insurance

Introduction:

In recent years, directors and officers liability insurance has become a core component of corporate insurance. As many as 95% of Fortune 500 companies maintain directors and officers ("D&O") liability insurance today. Furthermore, it has become a commonplace of the financial world that disappointed investors will charge corporations and their officers and directors with securities fraud whenever a company's stock drops significantly in price. Studies indicate that the average settlement of securities fraud litigation in 1999 was greater than $8 million, with average defense costs exceeding $1 million. In light of these numbers, it should not be surprising that such litigation has become almost routine, and D&O liability insurance plays a large role in handling it. At the same time, the D&O insurance industry has become highly specialized and new products are constantly emerging to meet the needs of specific markets. This article will discuss the historic and current trends in the industry. In addition, this article will address some of the primary legal and coverage concerns that must be considered by underwriters, claims handlers, corporations and their executives, and the attorneys who represent them.

History of D&O Insurance:

In the 1930s, in the wake of the depression, Lloyd's of London introduced coverage for corporate directors and officers. At the time, corporations were not permitted to indemnify their directors and officers. Joseph P. Monteleone & Nicholas J. Conca, Directors and Officers Indemnification and Liability Insurance: An Overview of Legal and Practical Issues, 51 Bus. Law 573, 574 (1996). However, directors and officers did not perceive a great risk, and the insurance did not sell. Well into the 1960s, the market for D&O coverage was negligible. In the 1940s and 1950s, courts, corporations and directors and officers began to see benefits to corporate indemnification and prompted state legislatures to enact laws permitting it. Then, during the 1960s changes in the interpretation of the securities laws created the realistic possibility that directors and officers themselves, and not only corporations, could face significant liability. See Roberta Romano, What Went Wrong with Directors' and Officers' Liability Insurance, 14 Del. J. Corp. L. 1, 21 & nn. 74-77 (1989). Insurers responded to these changes by reviving specialty coverage for the "personal financial protection" of directors and officers.

The historic focus on "personal financial protection" distinguished D&O insurance from other kinds of commercial insurance that cover identified areas of corporate risk. Insurers had defined corporate risks they would insure. General liability insurance provided corporate insurance for bodily injury or property damage claims; fidelity bonds afforded specified first-party coverage for losses corporations incur due to certain acts of their officers, directors, or employees. D&O coverage, on the other hand, was not intended to be corporate insurance; much less an attempt at general corporate insurance for liability caused the corporation by virtue of the acts of its directors and officers. In recent years, however, D&O coverage has undergone a number of changes.

Current Importance of D&O Insurance:

The D&O industry matured and evolved during the 1970s through the 1990s, and continues to do so today. From its modest beginnings in the 1930s, D&O insurance has become a fixture in today's corporate world. Starting with basic D&O coverage, the industry has spawned a large number of new and related products. The original focus on "personal financial protection" is no longer the single driving force behind the industry, and D&O insurance is often coupled with coverages designed to protect the corporation, in addition to its directors and officers, from various liabilities.

During the 1980s, the first litigated disputes between D&O insurers and federal regulators (or the former bank officials whom the regulators sued) brought D&O coverage into the forefront in many significant and often highly publicized matters. In recent years, corporations of all kinds and their directors and officers have seen an increasing number of claims and increasingly large settlements. Watson Wyatt Worldwide, D&O Liability Survey Report (1997). Thus, D&O insurance remains an important protection for directors and officers. In addition to the traditional protections, the industry has set a trend toward expanding D&O coverage - both in terms of who is protected and against what they are protected. Many underwriters now write coverages that offer protection to the company for its own liability and for specific corporate concerns.

Claims against Directors and Officers:

As noted above, claims against directors and officers generally have been increasing over time. As of the most recent Wyatt survey, 31% of all companies - an all time high - could expect to have at least one claim made against its directors or officers, and each company averaged 0.87 claims - also an all time high. Watson Wyatt Worldwide, D&O Liability Survey Report, at pp. 42-44 (1997) (the "1997 Wyatt Report"). The frequency of claims against directors and officers, and the susceptibility of officers and directors to claims corresponds to a number of factors, including the size of the company, the company's type of business, whether the company is publicly or privately owned, and its number of shareholders. For example, companies with greater assets are more likely to have claims made against their directors and officers and on average experience more claims per company than smaller companies. Publicly held companies have two to three times as many claims made against their directors and officers than privately or closely held companies. However, companies with greater than 500 shareholders have a higher claim frequency than smaller companies, regardless of private or public status. Id.

Specifically, according to the 1997 Wyatt Report, companies with assets less than $100 million had a 12% susceptibility to claims, but companies with assets greater than $10 billion had a 63% chance of having a claim made against its directors or officers, and companies with assets greater than $1 billion averaged 1.64 claims per company in 1997. Large banking companies are the most likely type of business to have claims made against their directors and officers and average the most claims per company. Forty-two percent of large banks will have at least one claim made, while the large banking industry as a whole can expect an average of 6.69 claims per company. With the explosion of technology companies in the last ten years, and the corresponding fluctuations in their stock prices, claims against technology companies have also increased dramatically.

Basic Coverages:

At its most basic, D&O insurance protects directors and officers from liability arising from actions connected to their corporate positions. Due to general expansion in the industry, market pressures and the industry's responses to the development of case law, D&O insurance has expanded beyond its original and basic coverage. Thus, a single policy now may provide multiple and varied options by standard form or endorsement. The individual coverages discussed below typically are subject to distinct terms, conditions and deductibles, and even may be subject to distinct policy limits or sublimits. However, some common threads run through each coverage offered in a D&O policy. For example, D&O insuring agreements generally specify that coverage is limited to claims first made during the policy period. In addition, the insurer typically does not have a duty to defend but is required to cover the costs of the insured's defense.

Insuring Agreement [A] (D&O):

Although each policy will employ its own language, Insuring Agreement A, often referred to as "A-Side Coverage," typically provides coverage directly to the directors and officers for loss - including defense costs - resulting from claims made against them for their wrongful acts. A-Side Coverage applies where the corporation does not indemnify its directors and officers. A corporation may not indemnify its directors or officers because it either (1) is prohibited by law from doing so, (2) is permitted to do so by law and the company's bylaws but chooses not to do so, or (3) is financially incapable of doing so, due to bankruptcy, liquidation, or lack of funds. The laws regarding indemnification differ from jurisdiction to jurisdiction. Insuring Agreement A additionally may specify that coverage is limited to those claims connected to an insured's capacity as an insured director or officer of the company. This issue of capacity recurs throughout D&O coverage analysis. The limiting language may appear in the insuring clause, in the definitions of "wrongful act" or "insured" found elsewhere in the policy, or in all three clauses. Although a claim sometimes implicates an insured in a single and clear capacity, a claim may well arise out of an individual's multiple capacities. For example, an individual may be sued as a director and a shareholder of a company (perhaps as a purchaser or seller of company stock), or an officer of a homeowner's association may also be a homeowner and it may not be clear whether his or her actions were taken as one or the other - or both. Similarly, a corporations' lawyer may also sit on the board of directors.

Insuring Agreement [B] (Corporate Reimbursement):

A typical Insuring Agreement B, or "B-side coverage," reimburses a corporation for its loss where the corporation indemnifies its directors and officers for claims against them. B-side coverage does not provide coverage for the corporation for its own liability. The language and conditions of Insuring Clause B typically mirror Insuring Clause A.

Entity Securities Coverage:

Many D&O policies offer an optional coverage to protect the corporation against securities claims. Such coverage provides protection for the corporation for its own liability. Many policies today provide such coverage to the corporation whether or not its directors and officers are also sued; other policies, however, provide such coverage only where the corporation is a co-defendant with its directors and officers. Entity coverage may be part of the policy form as "Insuring Agreement C" or may be added as an endorsement. The addition of entity coverage for securities claims is a relatively new development, and addresses concerns and confusion raised by court rulings regarding allocation. See e.g. Nordstrom, Inc. v. Chubb & Son, Inc., 54 F.3d 1425 (9th Cir. 1995).

EPL Coverage:

Employment Practices Liability ("EPL") coverage also has become a common addition to corporate coverage - often by endorsement to the D&O policy or as a stand-alone policy issued to the company. This coverage typically protects directors, officers, employees and/or the company against employment-related claims brought by employees and, in certain circumstances, specified third-parties. For example, it provides coverage for wrongful dismissals or failures to promote, sexual harassment, and other violations of federal, state or local employment and discrimination laws brought by the company's employees. EPL claims have also seen a dramatic increase in frequency and severity over the past decade.

Defence Issues:

Most D&O policies do not impose a duty to defend on the insurer. They do, however, provide coverage for defense costs and give the insurer the right to associate with the defense and approve defense strategies, expenditures, and settlements.

Right to Select Counsel:

(A) The D&O insurer cannot impose its choice of counsel on an insured - the insured generally has the right to select counsel, subject to the insurer's consent. D&O policies typically provide that an insurer may not unreasonably withhold approval of an insured's choice of counsel. This feature is important to the insured corporation, which typically has developed ongoing relations with corporate and litigation counsel that it would want to use in high-stakes litigation against the company.

(B) Reimbursement and Advancement of Defense Costs Although D&O insurers generally do not have a duty to defend, D&O policies do cover defense costs. The primary questions that arise in connection with the payment of defense costs regard (1) control over the costs incurred and (2) when the insurer must make defense payments. In connection with the first question, although insurers do not control an insured's defense, under D&O policies they are required to reimburse only reasonable defense costs arising out of covered claims. Thus, an insured or his chosen counsel does not get a blank check.

Whether a D&O insurer must, or should, advance defense costs - that is, pay them as they are incurred - is a common question. Many of the issues affecting coverage cannot be resolved until the claim has been resolved. Specifically, certain exclusions only apply after a finding of fact has been made. For example, as discussed below, policies generally exclude coverage for losses arising out of fraud. The exclusion only applies, however, where there is a final judgment finding fraud. Thus, where fraud is alleged, coverage is uncertain until the completion of the claim. In such situations, insurers may have an interest in not advancing defense costs until coverage is certain. However, insurers have an interest in seeing their insured vigorously defend claims against them. A vigorous defense can be a costly endeavor that may be well beyond the means of an insured. Thus, many policies provide that insurers advance defense costs under the condition that, should the facts ultimately demonstrate a lack of coverage, the insured will reimburse the advanced monies.

Key Provisions and Exclusions:

Twenty years ago, underwriters offered D&O policies based on two basic forms, and courts had seen very few cases in which they were asked to interpret those policies. Today, the number of D&O policy forms and cases interpreting them has multiplied. Although there are trends and standards within the industry, the specific language found in these policies differs from insurer to insurer and from policy to policy. Any coverage analysis must take into account the specific language found in the policy at issue. As a general matter, clear policy language will govern the application of coverage to a particular claim.

Definition of Claim:

Common to all coverages in a D&O policy is that each insuring clause generally provides coverage on a "claims-made" basis. In other words, it provides the coverage described for claims made during the period for which the coverage is purchased. Additionally, the insured typically must report the claim to the insurer during the policy period or within a reasonable time.

D&O policies generally define claim as any (1) civil, criminal or administrative proceeding, or (2) written demand for damages against an insured. Who is included as an insured will depend on which coverages are implicated and how the term is defined in the policy. That is, if it is a securities claim, and the policy so provides, a claim may be made against the company or against a director or officer. If it is an employment claim, and the policy so provides, a claim may be made against the company, a director or officer, or an employee.

Some policies offer more detailed definitions of claim. For example, a policy may state that a civil proceeding includes arbitration, mediation or other alternative dispute resolution. A policy may also explain that an administrative proceeding includes a formal investigation.

Many policies also include limiting a claim to those proceedings or demands made against an insured in his or her capacity as an insured. The capacity issue may be stated directly in the definition of claim, or may be stated in the definitions of "insured" or "wrongful act," either of which may be part of the definition of claim.

Definition of Loss:

Loss generally includes damages, judgments, awards, settlements and defense costs. Loss usually excludes fines or penalties, taxes, treble (or other multiplied) damages, and matters uninsurable under law. Where treble or multiplied damages are assessed, a D&O policy generally will cover the base amount, but not the multiplied portion of the loss. Some policies include punitive and exemplary damages in the definition of loss. Where included, coverage of punitive and exemplary damages explicitly is effective only where permitted by applicable law.

Punitive or exemplary damages:

Some states do not permit punitive or exemplary damages to be assessed at all. See e.g. Distinctive Printing and Packaging Co. v. Cox, 443 N.W.2d 566 (Neb. 1989). Those states that do permit punitive damages to be assessed may not permit insurance against them. See e.g. City Products Corp. v. Globe Indem. Co., 151 Cal. Rptr. 494 (Cal. Ct. App. 1979). Those states prohibiting coverage of punitive damages generally base the prohibition on public policy concerns. The longstanding reasoning is that the assessment of punitive damages is intended to set an example or punish the wrongdoer, and permitting insurance against such punishment would render such punishment ineffective. Id.

Matters uninsurable under applicable law:

Matters deemed uninsurable under law also may be the basis of explicit exclusions elsewhere in a policy. For example, coverage for liability for fraud may be barred by law, as well as by a dishonesty exclusion. As discussed above, coverage for punitive damages also may be barred by law.

Exclusions-

1. Dishonesty Exclusion:

Dishonesty exclusions bar coverage for claims made in connection with an insured's dishonesty, fraud, or willful violation of laws or statutes. The dishonesty exclusion also may be coupled with personal profit exclusion, barring coverage in connection with an insured's illicit gain. These exclusions typically are followed by a severability clause - that is, a caveat providing that the acts or knowledge of one insured will not be imputed to any other insured for the purposes of applying the exclusion. In other words, the exclusion only bars coverage for the insured(s) whose acts or knowledge are the basis of the claim at issue.

In the securities context, the Private Securities Litigation Reform Act of 1995 permits a defendant to request a special verdict from the jury, identifying its judgment of each defendant's state of mind. PSLRA, 15 U.S.C. 77z-1(d). Although a special verdict would assist in the proper application of the dishonesty exclusion, most securities lawsuits do not reach a verdict at all - they are either settled or decided on motions.

As mentioned above, many dishonesty exclusions include an adjudication clause, which provides that the exclusion only applies if the fraud or dishonesty is established by a judgment or other final adjudication. In connection with this clause, the question arises whether the judgment or other final adjudication must be in the underlying litigation. For the most part, the case law on this subject supports the position that most adjudication clauses, as they currently are written, require a final adjudication in the underlying litigation, rather than in a parallel coverage action or other lawsuit. Courts have held either that (1) the adjudication clause is ambiguous, so must be interpreted in favor of coverage, see e.g., Atlantic Permanent Fed. Sav. & Loan Ass'n v. American Cas. Co., 839 F.2d 212, 216-17 (4th Cir. 1988) (finding the phrase "a judgment or other final adjudication thereof" to be ambiguous, and therefore upholding the district court's decision against the insurer that the provision requires a finding of deliberate dishonesty "in the underlying action itself, rather than a subsequent coverage suit"), or (2) the clause explicitly requires a finding of fraud or dishonesty in the underlying litigation. See National Union Fire Ins. Co. v. Continental Illinois Corp., 666 F. Supp. 1180, 1197 (N.D. Ill. 1987) (finding that where an adjudication clause requires "a judgment or other final adjudication thereof," that "[t]he word ‘thereof' refers to the suit against the directors and officers and unless there is a judgment adverse to them in the underlying suit, then the exclusion does not apply"). This issue has a significant impact on the effect of settlements. Essentially, if an underlying lawsuit is settled without a specific admission of liability, a dishonesty exclusion is unlikely to apply.

2. Insured v. Insured Exclusion:

As the name implies, an insured versus insured ("IvI") exclusion bars coverage for claims made by an insured (e.g., a director, officer or corporate insured) against another insured. In addition, the exclusion may bar coverage for claims brought (1) by anyone directly or indirectly affiliated with an insured, (2) by a shareholder unless the shareholder is acting independently and without input from any insured, or (3) at the behest of an insured. The exclusion essentially prevents a company from suing or orchestrating a suit against its directors and officers in order to collect insurance proceeds. Questions regarding the application of the exclusion arise in the context of derivative lawsuits, bankruptcies and receiverships.

Specifically, it is clear that where a lawsuit is brought with the "active assistance" of an insured, the exclusion bars coverage. See e.g. Voluntary Hospitals of America, Inc. v. National Union Fire Ins. Co., 859 F. Supp. 260 (N.D. Tex. 1993), aff'd 24 F.3d 239 (5th Cir. 1994). It is not always clear, however, when a lawsuit is brought with the indirect involvement of, or at the behest of the insured, and there is very little case law expounding on the issue.

Where the policy only provides coverage for insureds when acting in their capacities as insureds - such as through a restrictive insuring agreement or definition of insured - the IvI exclusion likewise may be interpreted so as to apply only where the insured is bringing suit in an insured capacity. See Howard Savings Bank v. Northland Ins. Co., 1997 U.S. Dist. LEXIS 11857 (N.D. Ill. 1997). Where coverage does not depend explicitly on whether an insured was acting in an insured capacity, however, the IvI exclusion does not turn on the capacity issue either. See Kiewit Diversified Group Inc. v. Federal Ins. Co., 999 F. Supp. 1169 (N.D. Ill 1998).

Courts have held that where suit is brought by the receiver of a failed bank, an IvI exclusion bars coverage. Mount Hawley Ins. Co. v. FSLIC, 695 F. Supp. 469 (C.D. Cal. 1987); but see FDIC v. American Casualty Co., 814 F. Supp. 1021 (D. Wyo. 1991). Depending on the particular wording of the exclusion, some courts have held that an IvI exclusion does not bar coverage for a suit brought by a bankruptcy trustee. In re Pintlar, 205 B.R. 945 (Bankr. D. Idaho 1997); but see Reliance Ins. Co. v. Weiss, 148 B.R. 575 (E.D. Mo. 1992).

3. Professional Liability Exclusion:

As a general matter, D&O policies do not provide coverage for liability associated with the provision of professional services. Thus, where a bank officer is liable for acts as a banker rather than an officer of the bank, a D&O policy with a professional liability exclusion would not provide coverage. Similarly, where a doctor is the president of a professional corporation, the D&O policy would only protect him or her against liability from acts as president of the corporation, and would not provide coverage for professional malpractice claims. The line between professional services and acts outside the scope of this exclusion can be a fine one. Courts often draw a distinction between those acts that require special training or are at the heart of the profession and those acts that are administrative in nature. See e.g. Harad v. Aetna Cas. and Sur. Co., 839 F.2d 979 (3d Cir. 1988).

4. Prior Acts Exclusion:

Prior acts exclusions bar coverage for claims arising out of an insured's wrongful acts prior to a specified date. The date may coincide with the termination of coverage under a previous policy. The date may also coincide with a change in corporate status - such as a merger or acquisition. For example, where a subsidiary is acquired, the prior acts exclusion may exclude coverage for the subsidiary prior to the time it became a subsidiary. In such situations, the subsidiary may have run-off coverage from a previous policy to protect against liability arising from those excluded acts.

5. Prior and Pending Litigation Exclusion:

Prior and pending litigation exclusions generally exclude coverage for (1) claims pending prior to the inception of the policy, or another agreed upon date, and (2) subsequent claims based on the same facts or circumstances. Conflicts primarily arise regarding the second component of this exclusion. Specifically, the question arises as to when a subsequent claim is based on sufficiently overlapping facts and circumstances to fall within the scope of the exclusion. Courts have held that the two claims need not be brought by the same plaintiffs to trigger the exclusion. See e.g., Unified School Dist. No. 501 v. Continental Cas. Co., 723 F. Supp. 564 (D. Kansas 1989) (finding exclusion applied where new plaintiffs brought new claims). Furthermore, the claims can allege different harms, and still be excluded from coverage by this provision. See, e.g., Ameriwood Indus. Int'l Corp. v. Am. Cas. Co. of Reading, Pennsylvania, 840 F. Supp. 1143 (W.D. Mich. 1993) (rejecting argument that allegation of different legal claims prevented operation of exclusion). The exclusion additionally may apply even if the two claims allege different legal violations, or are brought in different courts and pursuant to the authority of different jurisdictions. See, e.g., Bensalem Township v. Int'l Surplus Lines Ins. Co., 91-5315, 1992 U.S. Dist. LEXIS 8243 (E.D. Pa. June 15, 1992) (applying exclusion where prior claims sought relief for violations of Pennsylvania law and later claims sought relief for violations of federal law), rev'd on other grounds, 38 F.3d 1303 (3d Cir. 1994).

Meaning of Director as per the Companies Act, 1956:

A company is a legal entity and does not have any physical existence. It can act only through natural persons to run its affairs. The person, acting on its behalf, is called Director.

Section 2(13) of the Companies Act, 1956, defines a Director as any person, occupying the position of Director, by whatever name called. They are professional men, hired by the company to direct its affairs. But, they are not the servants of the company. They are rather the officers of the company.

The definition of Director given in this clause is an inclusive definition. It includes any person who occupies the position of a director is known as Director whether or not designated as Director. It is not the name by which a person is called but the position he occupies and the functions and duties which he discharges that determine whether in fact he is a Director or not. The function is everything; name matters nothing. So long as a person is duly, appointed by the company to control the company''s business and, authorized by the Articles to contract in the company''s name and, on its behalf, he functions as a Director.

The Articles of a company may, therefore, designate its Directors as governors, members of the governing council or, the board of management, or give them any other title, but so far as the law is concerned, they are simple Directors.

Meaning of Liability:

The word liability has two general connotations. In business law, liability refers to the responsibility for a company's debt or other obligations. Some forms of business organization, such as a sole proprietorship, have unlimited liability, meaning that the owner is personally responsible for the debts and obligations of the business, and lenders or courts may look to the owner's personal assets for payment of these obligations. Limited liability organizations, such as corporations, allow lenders and courts to only seize the assets of the business rather than the assets of the owners.

However, liability is more frequently used in an accounting sense, where the word refers to a claim on a company's assets. Technically, a liability is a required transfer of assets or services that must occur on or by a specified date as a result of some other event that has already occurred.

Why liability matters?

Information about a company's liabilities is a key component of accurate financial reporting and a crucial part of thorough financial analysis. Although the Financial Accounting Standards Board, the Securities and Exchange Commission, and other regulatory bodies define how and when a company's liabilities are reported, and although liabilities make up a significant portion of the balance sheet, not all liabilities are required to appear on the balance sheet. Therefore, analysts must also carefully study the notes to a company's financial statements.

Excessive liabilities can ruin a company, but they are not always detrimental. Liabilities often represent the company's ability to defer cash outlays, allowing it to use that cash for other, possibly more profitable purposes until the obligation is due. The use of debt financing can magnify profits that would have otherwise gone unrealized.

Liability of directors under the Companies Act, 1956

Position of director:

The directors are the custodian of the interests of the shareholders. Their position is fiduciary vis-à-vis the Company. The directors must exercise their power for the benefit of the Company. There exists a relationship of a trustee and trust between the directors and the shareholders of the Company. The directors have been held trustees of the assets of the Company and in many cases the courts have directed them to reimburse the loss to the Company, where it was found that directors have applied the Company's money in payment of an improper commission. Each section also specifies the penalty to be paid in case of default, imprisonment or both.

The strictness with which the courts view the responsibility and the sacredness of the trust reposed in the directors had been emphasized in many cases. Their position has further changed in the era of Corporate Governance to the extent that the directors have to protect the interests of not only the shareholders but also other stakeholders.

In this article an attempt is made to define the extent and scope of liabilities of Directors viz. Managing Director, Working Director and an ordinary Director under the Companies Act, 1956.

Liabilities of Directors:

The liabilities of the directors vary according to the status of the Company i.e. whether the Company is private or public. But in all cases in discharging the duties of his position, he must act honestly, carefully and without any negligence. The various liabilities of directors under the companies Act, 1956 may be summarized as under:

1. Filing of various documents with Registrar of Companies:

a) Annual Return within 60 days of the annual general meeting.

b) Balance Sheet within 30 days of laying the accounts at the annual general meeting.

c) Return of Allotment of Shares in Form No. 2 within 30 days of Allotment of shares.

d) Change in Directors / Secretary (Appointment / Re-appointment /Cessation/ Resignation etc.) in Form No. 32 within 30 days of such change.

e) Registration of certain resolutions and agreements u/s 192 in Form No. 23 within 30 days of passing of such resolutions etc.

f) Creation & modification of charges in Form No. 8 & 13 and Satisfaction of charges in Form No. 17 & 13, within 30 days of creation, modification and satisfaction respectively.

2. Holding of various Meetings under Companies Act, 1956:

a) Board Meeting:

b) Annual General Meeting

c) Extra-ordinary General Meeting

3. Maintenance of Statutory Books under Companies Act, 1956:

a) Minutes Book: for Board meeting and General meetings separately u/s 193.

b) Register of Members : showing name, address and occupation of each member, the share held including the distinctive numbers, the amount paid on the shares etc.u/s 150/151

c) Register of interested Directors etc. : showing the required particulars u/s 301

d) Register of Directors, Managing Directors and Secretary : showing the required particulars about them etc. u/s 303

e) Register of Directors, Managing Directors and Secretary shareholding: showing the required details about shareholding etc. u/s 307.

f) Register of Charges: showing the particulars of charges on the assets of the company u/s 143.

g) Register of Investments showing particulars of investment u/s 49/ 372A.

h) Register of Transfer of Shares: along with details relating to the transferor and the transferee and the No. of shares transfer etc.

4. Liability for negligence

5. Standard and degree of care and skill

6. Special Statutory Protection against Liability [S.633]

7. Fiduciary Duties

1.Directors as Officers in Default:

a) . Acceptance of public deposit
Directors and Officers Liability Insurance

(often called D&O) is insurance payable to the directors and officers of a company, or to the corporation itself, to cover damages or defense costs in the event they are sued for wrongful acts while they were with that company.

Typical sources of claims include shareholders, shareholder-derivative actions, customers, regulators, and competitors (for anti-trust or unfair trade practice allegations).

Directors and Officers Liability insurance is commonly purchased with a companion product "Corporate Reimbursement Insurance" (or "Company Reimbursement Insurance"). When purchased together, a single insurance policy is normally issued which is entitled "Directors and Officers Liability and Company Reimbursement Insurance". Modern Directors & Officers policies now frequently include cover for the Company Entity itself as well as Employment Practice Liability.

D&O insurance is usually purchased by the company itself, even when it is for the sole benefit of directors and officers. Reasons for doing so are many, but commonly would assist a company in attracting and retaining directors. Where a country's legislation prevents the company from purchasing the insurance, a premium split between the directors and the company is often done, so as to demonstrate that the directors have paid a portion of the premium.

A common misperception of D&O insurance is that it makes directors or officers able to engage in acts they know to be wrong; this is not the case. Intentional acts are not covered in D&O insurance. Only negligence by directors or officers would be covered.

In a recent spate of litigation, a number of adverse court verdicts regarding the liability of directors and officers of companies to a third party were passed where the directors and officers were held personally liable for payment of compensation to the third party. Ordinarily, the directors and officers are bound by duty towards the company itself, shareholders, employees, creditors, customers, competitors, members of the public, government and other regulatory bodies. Any breach or non-performance in the duties can result in claims against the companies and/or its directors of the company by reason of any wrongful act in their respective capacity. The Directors' and Officers' Liability Insurance policy has been designed specifically to meet any financial liabilities imposed upon them.

This policy is necessary for directors and officers of every company if they wish to avoid potential litigation owing to-

•Failure of supervision.
•Inaccuracy in statements of financial accounts.
•Lack of judgement and good faith.
•Mismanagement of funds.
•Mis-statements in prospectuses.
•Allotment of shares.
•Unauthorised loans or investments.
•Failure to obtain competitive bids.
•Imprudent expansion resulting in a loss.
•Using inside information.
•Unwarranted dividend payment, salaries or compensation.
•Misleading statements filed with the stock exchange.
•Misrepresentation in acquisition agreement for the purchase of another company.
•Wrongful dismissal of an employee.
Risks covered:

This policy covers all claims made in event of-

•Mergers, takeovers and divestment.
•Liquidation.
•Changes in control of shareholding.
•Share issues.
•Shareholder claims.
•Misdeeds of co-directors.
•Trustee accountability and responsibility.
•Customs and excise allegations.
•Administrative liabilities.
•Termination of employment.
•Disposal of old firm/ entry of new owners.
•Miscellaneous litigation.
Compensation Offered:

The extent of indemnity being severely restricted by the Companies' Act will reimburse the extent of legal costs expended only if the Director/ Officer successfully defend the act taken against him.

Also, coverage is available on a 'claims made' basis and applies only to claims made against the Board of Directors during the policy period, irrespective of when the wrongful act occurred.

The cover applies to-

•Liabilities arising from any claim made against Directors and/ or Officers of the company by reason of any wrongful act in their respective capacity.
•Liabilities against the company where it is required to indemnify the Directors/ Officers pursuant to common or statutory law provisions or Memorandum and Articles of Association.
•The company and its subsidiaries that are under the common control of the Directors/ Officers.
Exclusions:

•The policy will not pay for the losses arising from any claim.
•Prior and pending litigation and claims submitted under previous policies.
•Bodily injury, sickness, disease, emotional distress, death, damage or destruction of tangible property including loss.
•Insured v/s Insured. viz. Directors suing each other.
•Illegal personal profit and remuneration.
•Deliberate, dishonest or fraudulent acts.
•Pollution and/ or contamination.
•Insider trading.
•Outside directorship (can be covered with specific information).
This policy is offered by:

•National Insurance Company Ltd. (NIC)
•The Oriental Insurance Company Ltd. (OIC)
•United India Insurance Company Ltd. (UIIC)
•The New India Assurance Company Ltd. (NIAC)
•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.

What are the responsibilities of Corporate Boards?


•Review & authorize major corporate actions.
•Advice & 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
•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:

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.

Common Law and Statute:

Business Judgment Rule - Courts may apply the Business Judgment Rule to protect directors & officers from personal liability.
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 attracts and retain quality board members.

Bhopal disaster Case, AIR 1990 SC 273:

The Bhopal disaster was an industrial disaster that occurred in the city of Bhopal, Madhya Pradesh, India, resulting in the immediate deaths of more than 3,000 people, according to the Indian Supreme Court. A more probable figure is that 8,000 died within two weeks, and it is estimated that an additional 8,000 have since died from gas related diseases.

The incident took place in the early hours of the morning of December 3, 1984, in the heart of the city of Bhopal in the Indian state of Madhya Pradesh. A Union Carbide subsidiary pesticide plant released 42 tones of methyl isocyanate (MIC) gas, exposing at least 520,000 people to toxic gases. The Bhopal disaster is frequently cited as the world's worst industrial disaster The International Medical Commission on Bhopal was established in 1993 to respond to the disasters.

Background and causes:

The Union Carbide India, Limited (UCIL) plant was established in 1969 near Bhopal. 51% was owned by Union Carbide Corporation (UCC) and 49% by Indian authorities. It produced the pesticide carbary (trademark Sevin). Methyl isocyanate (MIC), an intermediate in carbary manufacture, was also used. In 1979 a plant for producing MIC was added to the site. MIC was used instead of less toxic (but more expensive) materials, and UCC was aware of the substance's properties and how it had to be handled.

During the night of December 2-3, 1984, large amounts of water entered tank 610, containing 42 tones of methyl isocyanate. The resulting reaction generated a major increase in the temperature inside the tank to over 200°C (400°F), raising the pressure to a level the tank was not designed to withstand. This forced the emergency venting of pressure from the MIC holding tank, releasing a large volume of toxic gases. The reaction was sped up by the presence of iron from corroding non-stainless steel pipelines. A mixture of poisonous gases flooded the city of Bhopal. Massive panic resulted as people woke up in a cloud of gas that burned their lungs. Thousands died from the gases and many were trampled in the panic.

Theories for how the water entered the tank differ. At the time, workers were cleaning out pipes with water, and some claim that because of bad maintenance and leaking valves, it was possible for the water to leak into tank 610. UCC maintains that this was not possible, and that it was an act of sabotage by a "disgruntled worker" who introduced water directly into the tank However, the company's investigation team found no evidence of the necessary connection.

The 1985 reports give a quite clear picture of what led to the disaster and how it developed, although they differ in details.

Factors leading to this huge gas leak include:

•The use of hazardous chemicals (MIC) instead of less dangerous ones
•Storing these chemicals in large tanks instead of several smaller ones
•Possible corroding material in pipelines
•Poor maintenance after the plant ceased production in the early 1980s
•Failure of several safety systems (due to poor maintenance and regulations)
Plant design and economic pressures to reduce expenses contributed most to the actual leak. The problem was then made worse by the plant's location near a densely populated area, non-existent catastrophe plans, shortcomings in health care and socio-economic rehabilitation, etc. Analysis shows that the parties responsible for the magnitude of the disaster are the two owners, Union Carbide Corporation and the Government of India, and to some extent, the Government of Madhya Pradesh.

Compensation from Union Carbide:

•The Government of India passed the Bhopal Gas Leak Disaster Act that gave the government rights to represent all victims in or outside India.
•UCC offered US$ 350 million, the insurance sum.
•The Government of India claimed US$ 350 billion from UCC.
•In 1989, a settlement was reached where UCC agreed to pay US$ 470 million (the insurance sum, plus interest) in a full and final settlement of its civil and criminal liability.
•When UCC wanted to sell its shares in UCIL, it was directed by the Supreme Court to finance a 500-bed hospital for the medical care of the survivors. Bhopal Memorial Hospital and Research Centre (BMHRC) was inaugurated in 1998. It was obliged to give free care for survivors for eight years.
Legal proceedings leading to the settlement

On 14th December 1984, the Chairman and CEO of Union Carbide, Warren Anderson, addressed the US Congress, stressing the company's "commitment to safety" and promising to ensure that a similar accident "cannot happen again". However, the Indian Government passed the Bhopal Gas Leak Act in March 1985, allowing the Government of India to act as the legal representative for victims of the disaster, leading to the beginning of legal wrangling.

March 1986 saw Union Carbide propose a settlement figure, endorsed by plaintiffs' US attorneys, of $350 million that would, according to the company, "generate a fund for Bhopal victims of between $500-600 million over 20 years". In May, litigation was transferred from the US to Indian courts by US District Court Judge. Following an appeal of this decision, the US Court of Appeals affirmed the transfer, judging, in January 1987, that UCIL was a "separate entity, owned, managed and operated exclusively by Indian citizens in India". The judge in the US granted Carbide's forum request, thus moving the case to India. This meant that, under US federal law, the company had to submit to Indian jurisdiction.

Litigation continued in India during 1988. The Government of India claimed US$ 350 billion from UCC. The Indian Supreme Court told both sides to come to an agreement and "start with a clean slate" in November 1988.[Eventually, in an out-of-court settlement reached in 1989 , Union Carbide agreed to pay US$ 470 million for damages caused in the Bhopal disaster, 15% of the original $3 billion claimed in the lawsuit. By the end of October 2003, according to the Bhopal Gas Tragedy Relief and Rehabilitation Department, compensation had been awarded to 554,895 people for injuries received and 15,310 survivors of those killed. The average amount to families of the dead was $2,200.

Throughout 1990, the Indian Supreme Court heard appeals against the settlement from "activist petitions". Nonetheless, in October 1991, the Supreme Court upheld the original $470 million, dismissing any other outstanding petitions that challenged the original decision. The decision set aside a "portion of settlement that quashed criminal prosecutions that were pending at the time of settlement". The Court ordered the Indian government "to purchase, out of settlement fund, a group medical insurance policy to cover 100,000 persons who may later develop symptoms" and cover any shortfall in the settlement fund. It also "requests" that Carbide and its subsidiary "voluntarily" fund a hospital in Bhopal, at an estimated $17 million, to specifically treat victims of the Bhopal disaster. The company agreed to this. However, the International Campaign for Justice in Bhopal notes that the Court also reinstated criminal charges.

M.C. Mehta v. Union of India, AIR 1987 SC 965 (Oleum Gas Leak Case):

The case of M.C. Mehta v. Union of India originated in the aftermath of oleum gas leak from Shriram Food and Fertilizers Ltd. complex at Delhi. This gas leak occurred soon after the infamous Bhopal gas leak and created a lot of panic in Delhi. One person died in the incident and few were hospitalised. The case lays down the principle of absolute liability and the concept of deep pockets.

Directors Liability Insurance in Canada:

Directors & Officers liability Insurance is a claims made policy which covers the Directors, Officers, and Employees for their exposure as D's & O's for the manner in which they conduct the affairs of the Association. The policy covers defense costs, wrongful acts, and administrative errors and omissions.

Coverage's:

•Insured's Liability Insurance- pay on behalf of the Insured all loss for which the insured is not indemnified by the Entity (even by reason of the Entities Insolvency) and for which the Insured shall become legally obligated to pay because of a wrongful act committed in the discharge of Administrative Duties.
•Directors & Officers Indemnification Insurance - The Insurer agrees to pay on behalf of the Entity all loss for which the Entity shall be required by law, it's articles of incorporation or its by-laws to indemnify the Directors & Officers.
•Penal Defense Costs - will reimburse a D & O, if found innocent, of criminal charges which result from his/her administrative activities within the Entity.
Limits of Insurance:

•Coverage A & B- $1,000,000 per loss $10,000,000 per year
•The annual aggregate is split among 6 provinces
Conclusion:

In the contemporary liberalization global business environment, the role of the director and officer of a company is becoming more significant. The new dimension of the corporate governance is warrant more transparency in the corporate transaction. In the process, the director and officer of the board to shoulder specific duties and responsibilities. Any lopes in their performance may be fatal to the company and shareholder of the company. The company have to pay for it. The alternative available to companies to protect form such liability is insurance. The director and officer insurance provide protection to the company, the director and officer to come out of the tangle litigation . The director and officer are getting and more exposed to variety of legal liability in the increasingly litigious corporate world. Their duties and responsibilities have further multiplied due to specific requirement for good corporate governance. But there are lot of litigations and constraints on the part of the directors to be always vigilant so that they can always take right decision to ensure the best performance of the company. The major constraints come form macro factors like market risk, technology risk, political risk or financial risk where they do not have any control.

So they are porn to make mistakes and commit wrongful act in some case. For wrongful act they are liable to stakeholders under the best practice of the corporate governance. The director and officer liability insurance policy help the directors and the to company transfer such the risk and legal liability to professional fund mangers.



Most of the companies not aware of the availabilities insurance protection against the risk of corporate liability. the promoter director and officers are not aware of the extent of the coverage available to them. The gaps in the awareness about the availability of legal protection are causing damages to the companies. With the lack of knowledge of indemnification and protection of the director and officer of the company, the Memorandum and Article are silent on the issue the protection of the directors and officer of and their indemnification. because of this, the director and officer face various litigation and fixed with the personal liabilities. As such its essential, which preparing the memorandum and article of Association, to incorporate the clause relating to protection of their director and officer form their liability.

The people governing the companies should also know the extent of the coverage available under the director and officer polices. They do not protect the liabilities arising out of fiduciary relationship and the personal liabilities. to protect the directors and officer form their personal liabilities. To protected directors and officer form their personal liabilities arising due to discharging of statutory duties of companies, the company should either incorporated the clause in the Memorandum and Article, or purchase separate polices to cover personal liabilities. The company should have awareness about their fact excluding and inclusion clause in the director and officer polices. The company should understand the required extent of legal protection to director and officer, and purchase the director and officer polices to that extent. If they fail in understanding the policy they purchase of fail the required policy, the protection may not be available to the companies for which they planned and the court may impose penalties or order payment of damages either by the companies or the director and officer of the companies, in the personal capacities, thus the understanding the director and officer policy and their coverage is an important element

In Indian aware relating director and officer insurance [polices are and their coverage is very low. The concept of the good governance and social responsibility of the companies are exposing the director and officer to various risk. The director and officer made accountable to the inrnal and external people and to society and government. in the complex business environment , the director and officer require protection at every phase. As such the company should come forward to help them out of the problem. If the no people will be afraid of taking the position of the director and officers. The investors, creditors, supplier who are dependent of the company also suffer losses.

In the present corporate environment the role of the director more crucial. If the independent director ask to compensate stake holder and companies for the failure of a business taken by the board of the director, no one come forward to involve in the management of the company . As the are not spared form the liabilities claim, the company have to forego the expertise of independent director, and they should exclude form the liability or should have strong protection form available liabilities.

The director and officer polices liabilities are more costly. There is different product designed by different insurance companies in India and abroad. The Indian multinational companies operating across the global have to inevitable purchase director and officer insurance and other professional indemnity polices to save the interest of the stakeholders. While purchasing the polices company should the right insurance polices to cover the required liabilities. While selecting the polices of every company and its directors should understand the nature of their business, excepted possible litigation and liabilities. Probable claimant extent of the cost and expenditure either to file or defend the suit , the applicable existing local and national law, the hierarchy of the court, the mood and attitude of the court to such issue, to possible fraud and moral hazard in the area. After understanding the requirement director and officer polices can be purchased to that affect. Once the police purchased the company and CEOs should read the policy cautiously and understand the term and condition of the policy.
Ashish Gupta 5th year, B.B.A.LL.B Symbiosis Law School,Pune

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Save Your Money - Protect Your Insured Car

There are a number of ways in which you can protect your car from being targeted unnecessarily by joy riders and thieves. Here are 8 tips that we have compiled, they may seem obvious but it is often little mistakes than can lead to great expense and heartache.

Like the day you forget to lock the boot, or the time you left the car running while you nipped to the cash machine.

Take a look at our list of how to keep your car as safe as you can.

When you park your car in a car park that requires a ticket in order to exit, make sure you take the ticket with you.

Do not leave any possessions on display; when you leave valuables or possessions in your car make sure you put them in the boot and lock it. If you do not have room in the boot try to hide any valuables under the seats. Mobiles, cigarettes, CD's and bags are all prime targets for thieves.

Always try and park in a well-lit and public place, or in a car park that has a security guard or cameras in order to deter thieves and joy riders.

Always double-check that you have shut all the windows including the sunroof, as it is easy for a thief to get in by using the sunroof. Finally, double check that you have locked all the doors, and the boot before leaving your vehicle.

Never leave your keys in the ignition, even for a moment while you pop into a shop or to the cash machine. It only takes 3 seconds for a thief to get in and drive off.

Have the registration number of your car etched into every window. This will discourage thieves, as it increases their workload.

Look into getting a good steering wheel lock and an alarm this acts as a deterrent as it will delay a potential thief. Also, many, insurance companies will give discounts on your premium if you have a quality security device fitted.

If you park your car in a driveway at night, it may be a good idea to invest in some good gates or a removable bollard.

Don't use your mobile when driving.

Willie James is a car insurance expert of CAR INSURANCE NEWS agency. His job is to analyze auto insurance information and publish different reviews for Federal Insurance Bureu (FIB) in Moscow, Russia.

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Florida Health Insurance Minority Health Initiative

State Senator Arthenia Joyner (D-Tampa) on Tuesday welcomed reassurances from the governor’s office that a move to transfer the innovative Office of Minority Health into a sprawling division within the Florida Department of Health would be rejected.

The decision came less than 24-hours after the Tampa Democrat sent a letter to Governor Charlie Crist, urging him to rethink his agency’s pending action.

“The Office of Minority Health is currently on the cutting edge with regard to research, cultural competency and health equity policy,” Joyner wrote. “This momentum must be continued. Moving this office into a large department division will most certainly diminish the capability of the office to continue developing and implementing direly needed policies and strategies essential to eliminating health disparities among racial and ethnic populations.

"It is my deepest fear that the focus and progress of the program will be lost by swallowing this mission within an immense bureaucracy.”

At issue was an abrupt decision by DOH to transfer the highly effective Office of Minority Health into the agency’s sprawling Division of Family Health Services.

Established by the Legislature five years ago, the Office of Minority Health was launched by the former governor as a way to close the widening gap in health care for minority and ethnic residents by providing community medical outreach services, among other programs.

Since then, the group has made significant headway in rolling back not only the disparity in health services available to such groups, but the high costs taxpayers shoulder due to over-reliance on indigent emergency room care.

This has been accomplished at little cost to the state. Staffed by five including the director, only three full time members of the unit are paid by the state; the other two are funded through federal grant money.

“Since its inception, the Office of Minority Health has been extremely effective, already touching 50,000 lives throughout Florida and saving taxpayers potentially millions of dollars,” said Sen. Joyner. “The medical treatment this office spearheads costs on average about $100. Compare that to the typical emergency room visit costing taxpayers roughly $1600. That’s a huge savings.”

Cut this last legislative session by $1 million, the office has been struggling to complete a series of innovative initiatives, among them an agency-wide strategic and operational plan, along with a county-by-county database so that private health care organizations and residents can track community needs and progress.

The sudden decision to absorb into a larger, more cumbersome bureaucracy such a dynamic office noted as much for saving lives as for saving money made little sense, particularly in light of the economic conditions the state currently confronts, according to Joyner.

“Nationwide, our state comes in 45th in health care rankings, much of it due to the lack of health insurance and health care options for a large group of our diverse population. The worsening economy is only compounding matters.”

The Senator said she was heartened to hear that the governor pledged to protect the group’s independence, while continuing to report to the agency’s deputy surgeon general.

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For Gay Couples, Health Insurance : WALECIA KONRAD

“IT’S not easy being gay,” said Mary Jo Hudson, director of the Ohio Department of Insurance. She wasn’t referring to political opposition and other obstacles, but the plight of same-sex couples who are trying to get and keep ohio health insurance.

“You’ve got to go through a lot of hoops,” said Ms. Hudson, who is gay and has lived with her partner for eight years.

Same-sex couples have been making headlines; Maine followed the lead of Iowa and Vermont this week in legalizing same-sex marriage, and several other state legislatures are now considering it. But Ms. Hudson says that fairer and more comprehensive health care coverage for partners — whether they are legally married or not — is not necessarily part of the package.

“For the vast majority of gay couples,” she said, “getting health insurance for a domestic partner is still a challenge.”

Currently about one-third of companies with more than 500 employees offer domestic partner benefits. That’s up from about 12 percent in 2000, according to a study from Mercer, an employee benefits consulting firm. But the percentage drops off sharply when smaller employers are counted, Ms. Hudson said.

And there is no provision for domestic partner benefits for federal employees, although there are some legislative efforts to change that. Some states and municipalities offer their employees domestic partner coverage, depending on the state laws.

Even if the relationship is formalized with the state in a marriage or union, that does not always obligate the employer to cover a same-sex spouse. For one thing, self-insured employers are not regulated by the states.

And other benefit-providing employers that choose not to offer such coverage can sometimes use the Defense of Marriage Act — a law that forbids the federal government to recognize same-sex marriage — to trump state laws, said Ilse de Veer, a principal with Mercer.

On the flip side, self-insured employers are free to offer domestic partnership benefits, whether or not a state recognizes unmarried relationships. And some employers limit their domestic partner benefits only to homosexual couples, on the rationale that heterosexual couples can get married, while in most states gay couples still cannot.

If you’re part of a same-sex couple and you’re fortunate enough to work for an employer that will provide coverage for your partner, the process can still be cumbersome and costly. Here are some of the basics.

DOCUMENT YOUR RELATIONSHIP Many employers and insurance companies require proof of a domestic partnership before you can qualify for benefits. One of the most common documents is an affidavit signed by both partners, explaining the details of the relationship. For more information on what needs to be included in an affidavit, the Web site insure.com offers a check list.You may also need to provide copies of jointly signed leases, homeowners’ insurance policies, joint bank account statements and other legal documents that show the two of you live together and are financially intertwined.

Many states, counties and cities, including New York City, have domestic partnership registries where unmarried couples can legally register their relationships. Registration is not the same as a marriage certificate, but it is a good way to prove the legitimacy of your relationship to employers and insurers, Ms. Hudson said.

PREPARE TO PAY MORE TAXES Unlike married couples, domestic partners must pay federal and sometimes state taxes on health care benefits. That’s because the Internal Revenue Service counts the value of the domestic partner’s benefit as income for the employee. What’s more, pretax dollars from an employee’s flexible spending accounts or health savings accounts cannot be used to cover the domestic partner’s benefits.

Let’s say, hypothetically, that the cost for a partner benefit is $10,000 a year, and the employee is at the 40 percent marginal tax bracket. In addition to the share of premiums the employee pays, he or she would pay about $300 a month in taxes.

“That really adds to the cost of the benefit,” Ms. Hudson said. “It may be why so few couples take advantage of domestic partner benefits when they are available.”

She cited a Williams Institute study that shows unmarried partners are two to three times more likely to be uninsured than married people.

Ms. Hudson says that in rare cases, companies have been willing to increase employees’ paychecks to make up for the extra tax burden. So be sure to ask your human resources department about this.

A POSSIBLE TAX EXCEPTION For some people, there may be a way around the tax bind.

If your partner lives in your household for the entire tax year, receives 50 percent of his or her support from you and generally meets the criteria laid out in section 152 of the tax code, then you are legally entitled to receive domestic partnership health benefits tax-free. A lawyer or accountant well versed in domestic partnership law can help determine if you’re eligible for this break.

“This break is confusing and misunderstood because it is a special exemption for health care benefits only,” said Ms. de Veer. “Employers don’t always understand this part of the code themselves, so they often fail to tell employees about it. Lots of couples are paying taxes on health benefits that don’t have to.”

To determine if your partner receives 50 percent support from you, fill out the worksheet on page 33 of I.R.S. Publication 17, at www.irs.gov/pub/irs-pdf/p17.pdf

COVERAGE FOR CHILDREN Most employers that cover domestic partners also cover the children of that partner, considering it a parental relationship on the employee’s part, even if it has not been formalized legally.

With individual policies, though, depending on the insurer, you may have to prove you are a legal custodian of your partner’s child, said Ms. Hudson.

“Filing for custody rights is probably something you should do anyway,” advises Ms. Hudson. “You’ll need that document for everything from signing school permission slips to getting health benefits.”

WHAT ABOUT COBRA? If you are covered under your partner’s employer-sponsored insurance, and your partner is then laid off, many firms will offer you the opportunity to buy the same health care coverage for up to 18 months under the federal law known as Cobra. If the relationship ends, you may also be able to elect Cobra coverage, just as you would if you were divorcing.

Because Cobra is a federal law, employers are not obligated to offer this coverage to unmarried partners, but many do, says Ms. de Veer. As with all Cobra coverage, you must be sure to make the election within 60 days of the last day of coverage under the employer’s plan.

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