ABSTRACT
This chapter considers whether defence costs cover is offered as an independent undertaking or as forming part of the core insuring clause. This is of fundamental importance to the operation of D&O cover: if defence costs cover is offered independently, the fact that insurers are in a position to avoid providing an indemnity under the main insuring clause may not affect their liability for defence costs. The chapter also considers the allocation of legal costs, a topic of great significance to insurers, assureds and practitioners. D&O policies usually offer cover not only to meet a director’s or officer’s liability, but also to provide financial assistance in respect of the costs of defending against such liability. D&O insurers’ consent to the incurrence of defence costs will unquestionably come under the spotlight as a result of the Companies Act 2006, section 205. A settlement was reached resulting in both the company and its directors being liable to pay damages.
