D_&_O Application
Typical D&O Covergaes

You probably know the importance of D & O, if not, you should.

If you play a role on a board of directors for a 'for profit' or 'not-for profit' organization, regardless if it is on a voluntary basis or not, you have a personal liability exposure that can be quite severe. Period.

We are frequently asked to give examples of past, or potential claims situations as a means of illustrating some areas of potential risk.

The following scenarios are not meant to intimidate you, but to illustrate the exposure that is present, even more so in this day and age.

A non-profit organization specializing in the leisure and educational fields undertook a risky building expansion program, resulting in severe financial difficulties and a potential lawsuit against the directors and officers. The fact that their service was voluntary with no remuneration is no defense.

The president of a professional association authorized a $150,000 investment, disregarding the requirement that anything over $100,000 has to be authorized by the board. He now faces a lawsuit.

Two former officers of a Quebec-based association are being sued for alleged mismanagement, which resulted in a quantified loss of $500,000.

There are quite a number of cases involving both non-profit and for-profit organizations, where the directors and officers face claims for unpaid wages and taxes following entity bankruptcy. This is a real and dangerous exposure as liability is imposed by statute, requiring no proof of negligence.

In 1985, the Canadian Commercial Bank of Edmonton collapsed, leaving a shortfall of $650 million. The liquidator brought suit against former directors, officers and auditors and was successful to the tune of an $82 million settlement.

Castor Holdings Ltd., a Montreal-based investment group, went bankrupt in 1992. Creditors brought suit against the directors over $16 million in dividends declared and paid out a year prior to the company going under.

A former shareholder of a high tech company sued the directors, alleging that they induced him to sell his shares at less than their real value by down-playing the company's prospects which were, in reality, excellent.

In another case, a shareholder sued directors alleging that they induced him to buy shares with overly-optimistic earnings forecasts. In yet another case, a shareholder of a computer company claimed against the directors for their refusal to accept an attractive take over offer.

Two Quebec financial institutions launched an action against an investment dealer for $35 million. The investment dealer in turn filed suit against the former directors of the company they had represented to the two financial institutions. This case arose out of a prospectus for a debenture issue in 1990. It is alleged that the prospectus failed to disclose certain contingent liabilities (guarantees and an indemnity agreement).

A Canadian financial institution and its directors are being sued by a U.S. corporation for $47 million, alleging unjustified withdrawal of financial support for a Canadian condominium project.

For D & O inquiries of any kind or to get a quotation, have a look at our D_&_O Application or contact us by e-mail:

Dick Hubbard
John Hubbard
Carol Rettig

Or alternatively by telephone:
Phn (905) 712-4668
Fax (905) 712-3586

HUBBARD INSURANCE BROKERS...OVER 35 YEARS OF BROKERING AND CONSULTING

If you have any questions about your business insurance, please feel free to email us;
John, Dick or Carol.