Here are a number of claims scenarios illustrating how clients’ D&O policies have been called upon to provide professional defence costs, professional representation costs and damages for a variety of actions, investigations and allegations. These scenarios are all based on actual cases with the details changed to ensure confidentiality:
Criminal action by European state criminal prosecutor
Directors are summoned by the examining magistrate in a criminal investigation, alleging misuse of company assets.
Alleged breach of fiduciary duty is brought by insolvency trustees
Former executives of a real estate company are served with a complaint of negligence and mismanagement by overpaying for foreign real estate.
Mismanagement and asset stripping
Former directors are summoned by liquidator for mismanagement and asset stripping after wound up French subsidiary showed significant lack of assets.
Investigation by European regulator
Directors are investigated by European state regulatory authority about overpayment of public money for business events.
Investigation by City of London Fraud squad
A director in a subsidiary company is investigated over allegations of bribery in relation to providing favourable purchasing terms to a customer.
Investigation by United States Department of Justice
The US subsidiary of a European company and several of its directors and officers, are investigated for alleged worldwide antitrust activities.
Action by Subsidiary company
A company’s subsidiary claims breach of fiduciary duty by the president of the company’s Management Board over failure to supervise derivative transactions.
Shareholder action at AGM
Shareholders approved legal action against its chairman and former directors, alleging company losses from transfer of funds to an investment entity.
Shareholders securities action
Shareholders take legal action against the company alleging that its false and misleading financial information in reports, press releases and analyst conference calls, which caused the Insured’s Level 1 American Depository Receipts (ADRs) and its ordinary shares to trade at artificially inflated prices.
Action by Creditors
A subsidiary is accused of conspiring to mislead creditors of one of its overseas customers. The creditors, which had gone bankrupt, named the parent, subsidiary and directors in the action and allege that they all conspired with the customer and its management to make these misrepresentations.
Action by purchaser after acquisition
After acquiring the insured company, the purchaser brought legal action against the former CEO for allegedly providing false information resulting in an over-valuation of the insured’s assets.