Directors and Officers (D&Os) of companies in the mining industry deserve to be protected through insurance policies as they are risking their personal assets for the benefit of shareholders. As such, having proper risk management systems and insurance policies in place that can cover against losses to the D&Os as well as the corporation are important.
Here are 3 levels of protection that are available to Directors and Officers of mining corporations to take into consideration:
1. Risk Management
Every D&O should be aware of their responsibility to the corporation, the role they fulfill on the board, or in a management capacity and the expertise they are expected to bring to the position.
The first line of defense for the D&Os is to execute their responsibility to the corporation with the required level of care and skill and using sound judgment. Diligence in attending board meetings, reviewing board materials, understanding and questioning management and matters put before the board will greatly reduce the risks of litigation and enhance the D&O’s defense in responding to any claims.
2. Corporate Indemnification: By-Laws and Contractual Indemnity
Most corporate by-laws state that the company will advance defense costs and settle claims made against D&Os acting in that capacity. It is recommended that D&Os also have this indemnification specified in their contracts. This prevents any by-law changes from affecting D&Os rights to indemnification.
There have been court cases that ruled in favour of a corporation to change bylaws after a D&O has left the corporation and that these new by-laws will apply to that D&O, rather than those that were in place at the time he/she served as a D&O. This makes the contractual indemnification that much more important.
The Directors’ and Officers’ Liability policy is an “Errors and Omissions” coverage designed to protect D&Os against personal liability and financial loss arising from a wrongful act committed, or allegedly committed, in their capacities as Directors and/or Officers of the insured companies. This policy covers financial loss arising out of a negligent act, error or omission in the rendering of professional services.
Meanwhile, a General Liability policy will only cover bodily injury and property damage for which the insured becomes legally liable.
The D&O policy responds to cover financial losses that would not be covered under the E&O policy (such as securities claims) and also provides coverage for individual D&Os whereas the E&O policy would only cover the entity.
Find out more:
This list is not exhaustive and there are a variety of other insurance coverages that Directors and Officers of mining companies need in order to address all the risks they face and prevent losses. Download our free guidebook “Directors' and Officers' Liability Insurance Guide” here to find out how you can protect your company’s assets: