GERMAN D&O POLICIES AS A DECEPTIVE PACKAGE FOR THE SUPERVISORY BOARD?
Deceptive packaging’ is the term commonly used to denote product packaging that is intentionally designed to mislead the customer with respect to its contents. Whether German supervisory board members are adequately insured under the conventional D&O policy shall be explored by way of an exemplary scenario drawn from experience.
The supervisory board of a machine engineering company needed to assess the validity of claims against the former chairman of the executive board on the grounds of flawed project planning. According to precedent set by the German Federal Supreme Court, the supervisory board is subject to the duty to independently investigate the viability of a corporation’s compensation claims against executive board members. This duty results from its supervisory and monitoring functions. Pursuant to the findings in the claims’ review report, the company presumably had enforceable liability claims. In cases where such a claim exists, the supervisory board must, as a general rule, pursue these claims. In the example given, it did so by filing complaints demanding millions from the defendants.
As the defence against claims is an essential promise embodied in the D&O policy, the former chair of the executive board, with the assistance of the D&O insurer, opposed the claim. To that end, the insurer provided the defendant chairman with counsel and coordinated the defence strategy with the latter. As part of this strategy, the former CEO proceeded to counterattack and served a third-party notice on the chair of the supervisory board, accompanied by the demand to join litigation on the defendant’s side.
Jan-Mar 2016 Issue
Hendricks & Co