| D&O is the abbreviation for directors' and officers' liability insurance. The insurance object is the civil compensate liability by the company's directors and the senior officers for the company or a third party. In the 1930s, the system of D&O came into being in U.S.A and at present it is widely adopted by such developed market economy countries as U.S.A, Britain, Japan, etc. D&O belongs to professional liability within liability insurance. Its object is the civil compensate liability caused by directors' and senior officers' negligence in performing the company duties. In fact, Its object is an undetermined risk which belongs to insurance risks.With security, efficiency, justice and so on, the D&O system decentralizes directors' and senior officers' professional risks by means of insurance and assures their working safety. The system also makes sure the compensate liability for the interested person and facilitates the company's steady operation. And the system is helpful for the company to attract the excellent managerial and administrative personnel and persuade them to stay. It helps the directors and senior officers to take active management strategies and ensures the economic dynamics for the company and the whole society. In addition, it provides support and assurance to strengthen the directors' and senior officers' obligation and liability,which makes for the perfection of the corporate governance.The appearance and development of D&O system are closely connected with the changes of the securities market. It's the process of gradual interest balance for the company's stockholders, the directors and the officers, and it is also the process of perfecting the local corporate governance. It is popular that the company is acted as applicant for insurance, but there is great debate in the academic fields. The company pays the insurance premium. Its rational basis is that the risk of civil compensates liability of the directors and officers is the duty risk for the directors and the senior officers performing the company's duties. Because of the contract form and the directors bearing ability, it is practicable for the company to pay the insurancepremium. Although D&O is named after the directors, the insured is not confined to the directors. In fact, it is used widely and is in close relation to the legislation of bearing the individual liability for the company's directors and the senior officers. It can include all those who need to bear the individual liability while performing the company's duties and the derivative, such as heritors, bankruptcy trustees, etc. According to the rule of autonomy of the will, the insurer and the insured can negotiate under the frame to determine the insuree's coverage. There are two standards to determine the insurance coverage of D&O: one is the objective, that is to say, it must be the activity of the directors and the senior officers performing the company's duties. The other is the subjective. The subjective psychological state of the behavior must be negligence. The two standards must be used at the same time. The coverage of insurance compensation includes damages and lawsuit fees. The insurers are generally compensated by quota.Up to now, D&O are practical preliminarily in China, but there still exists argument. In order to strengthen the duties and liability of the directors and the officers and perfect corporate governance, China should introduce the D&O system and amend the constitution to dispose of the current legal obstacles. |
