Board responsibility and board responsibility precaution
Board liability insurance or D&O (directors and officers), as the insurance is also called, is insurance against liability board members and others in the management may incur because of incorrect decisions or other dispositions that cause someone a financial loss. This is a personal financial responsibility, and the claim can therefore be directed against individuals on the board or management.
Board responsibility arises out of what is called fault liability, which involves responsibility for damage caused by negligence. Board members and others in management have a duty of care. In this lies an expectation that the board’s and management’s assessments are based on a careful decision. Negligence has a limit to intentional/conscious damage on the one hand and accidental accidents on the other. It is the negligent and intentional actions that can trigger board liability.
The board is basically collectively responsible for the decisions that are made. You can therefore become liable for damages for decisions made by the board even if you did not have an active role during the decision-making process that led to liability for damages. Having said that, a member who has voted against the decision will not normally be held responsible if this can be documented.
Examples of situations where management or the board may incur a claim are acquisition processes, issues and capital increases, downsizing processes and bankruptcy. In all such situations there are many assessments to be made and decisions to be made. These can later form the basis for claims against those who were on the board or management when the decision was made.
As a starting point, board work is not dangerous and just being a board member does not entail any responsibility. The most important thing is that you take the responsibility associated with the position you are in seriously.
For joint-stock companies, board responsibility is laid down in the Companies Act. For associations, board responsibility is unenforced by law.
Board liability insurance generally covers the personal financial responsibility you have as a member of the board or management. This is a useful insurance that costs little compared to the security it provides.
Contact us at Pensum Forsikringsmegling for a non-binding chat about board liability insurance for your company, condominium, or association. We can help with a review of your insurance contracts and assist in the dialogue with the companies so that you get the best possible cover adapted to your needs.
