Although insurance for managers or D&O has been in Spain for 25 years, it has never been known as it is now. Cases that have seen the light during the economic crisis such as that of the former president of Caja Madrid, Miguel Blesa, have brought this type of insurance to the press. Specifically, Blesa’s defense tried to face the civil bail of 16 million euros that the judge imposed on him for the scandal of the B cards of Caja Madrid, now Bankia, with the policy for Administrators and Directors that he had subscribed. However, the request was rejected and the insurer did not pay.
This type of policy presented by Blesa to avoid pretrial detention is a type of Civil Liability insurance that protects managers and administrators against possible claims by third parties for incorrect acts in the exercise of their positions. Policies are normally custom designed by insurance brokers, according to the specific risk of each company and position. Insurance usually also protect directors of investee entities, in addition to subsidiary companies created and acquired during the insurance period.
According to the VII Marsh Study on the Spanish Insurance Market D&O, prepared by the brokerage Marsh in 2014, although 74% of Spanish companies still do not take out this insurance ,this type of policy continues to expand. Specifically, the data reveal that in 2013 there were 34% more hiring’s by companies, which invested 154 million euros, 6% more than in 2013, in protecting their directors and directors.
The analysis reveals that the services sector accounts for 44% of policies of this type, followed by the industrial sector with 43%. By communities, the managers with the highest number of insurances for Civil Liability are the People of Madrid, Catalans, Andalusians, Valencians and Basques. On the other hand, this type of coverage has a greater reception in companies of the Ibex 35, since 100% of them contract this product. They are followed by listed companies, with 79%, unlisted companies, with 63% and SMEs, with 39%.
What coverages does D&O insurance have?
In addition to civil liability coverage, this type of insurance usually has other complementary ones such as external consulting expenses, legal defense or the payment of compensation.
With the civil liability coverage, included in all D&O policies, the insurer is responsible for compensating on behalf of the policyholder the claims filed against the manager. In addition, if the insured company has to take care of the compensation on behalf of the insured administrator for a claim, the insurer will refund the money in case it is recognized in the condition of the policy.
External consultancy costs
With this coverage, the company is responsible for paying the investigation expenses involved in an inspection or investigation before a possible sanction by a regulatory body or body such as, for example, the Treasury.
Many policies also include the expenses involved in defending the insured manager in court, as well as criminal bonds in case they are decreed by a judge before a possible crime. Other expenses also cover bankruptcy guarantees, extradition or even mishaps that occur in the work environment, such as dismissal, harassment or discrimination.
Protection of family property
Some insurers include coverage in their policies to protect marital or domestic partner property. In this case, the insurer would be responsible for covering the losses that could be caused by the claims to the legal spouse or domestic partner of an insured manager who has caused damage to a third party. This occurs in judgments that affect joint property ownership of property.
On the other hand, there are also insurers that cover hereditary assets, heirs and legal representatives. This policy protects the estate against possible claims.
Some insurers include in their policies liability for pollution claims. In this way, the insurance company would be responsible for paying compensation for damage of this type caused to third parties. There are policies that are even responsible for covering the cleaning costs that may arise from contamination.
Claims by injured parties
Mismanagement by the insured manager can generate complaints from shareholders or employees. According to Marsh’s report, in 2013 there were more complaints against specific management positions (68%) than those directed against the entire Board of the company (32%). The most reported figure was the CEO or executive director, with 69% of the claims, followed by the CFO or chief financial officer, with 39% of the claims.
On the other hand, those who claim the most compensation are shareholders,with 36.6% of claims, followed by employees, with 25%, creditors, with 14.5%, customers (10.7%), administration (9%) and competitors (2%).