Caution in Premium Funding Directors & Officers Liability Insurance

One of the areas of coverage that is available, but not always, under a Directors & Officers, or Management, Liability Policy is for insolvency.

Particularly in these tough times companies do go into liquidation and this can create an risk exposure for the directors from creditors and perhaps shareholders. It is at this time that the directors and senior officers of the organisation require the protection afforded by their Directors & Officers / Management Liability insurance policy.

What would be disastrous is that a premium funding company who finding themselves in the position of not receiving the balance of the premium instalments cancels the Directors & Officers / Management Liability Policy seeking a refund of premium from the insurer. In some cases, directors seeing the exposure have paid the balance of the premium to the premium funder to ensure the policy is not cancelled but this may not be the answer, as it may well create a whole raft of legal issues in its own right, even if they have the personal funds to do so.

My advice is that either this coverage is not premium funded or the policy is non-cancellable. Being a claims made policy, that is the trigger for a claim is at the time a claim is made against the policy holders and notified to the insurer, the policy needs to be kept in force and of course the impending insolvency notified to the insurer.

I have written other articles on the need for run off cover with Directors & Officers Liability, Management Liability, Professional Indemnity Insurance and even Public and Products Liability Insurance. See http://www.allanmanning.com/?p=155 as an example.

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