| Directors’ and officers’ liability insurance(D&O insurance) is a kind of professional liability insurance which has double functions of protection: protecting the insured form liability risk and protecting the innocent third party to get full compensation. The value and function of D&O insurance are believed to include the following four points at least:(1)Helping directors and officers disperse the risk of civil damage compensation caused by work. This kind of compensation usually costs so much that directors and officers can’t burden;(2)Helping companies obtain and retain outstanding managers;(3)Playing a role of a gatekeeper and an external corporate governance supervisors;(4)Safeguarding the legitimate rights and interests of a third party. Also, we could always hear a voice saying that D&O insurance may cause the problem of moral hazard. We usually set up several means as different levels of insurance premium and limitations of contract terms to control the moral hazard at practice.Study on the D&O insurance contract may help us to understand micro operation rules of the system, and to find the breakthrough designing more suitable contracts for China, that would mean a lot to the development of D&O insurance in our country. This article mainly discussed details of the D&O insurance contract from the following aspects: the foundation of D&O insurance(that is directors’ and officers’ civil liability); parties in D&O insurance; the insurance’s coverage and exclusions. All the studies above are done in order to provide some feasible solutions for the contract design in China.In addition, D&O insurance has been introduced to China for more than ten years, but its market performance would let almost all people down, if it is not a complete failure still. It is caused by various reasons. First of all, the law system of directors’ civil damage compensation in China is still not perfect. The relevant legal provisions scatter in "company law", "securities law", "enterprise bankruptcy law" and other legal documents. The legal terms sometimes are not precise too. And that would cause some obstacles in judicial practice. Take the term "directors’ duties of diligence" in the company law as an example, our law only indicate directors have duties of diligence to the company, but the content of "duties of diligence" defines vague, and what’s more, the legal consequence of breaching the duties is not clear. It is difficult for judicial practice in the case when applying the regulation. Deficiency of these laws makes our directors and officers hard to be litigated. So directors and officers have no need transfer their professional liability risk and buy D&O insurance. Secondly, we can find that "a dominant" or "insider control" phenomenon is very common in state-owned joint-stock company, which may further inhibit the demand of D&O insurance in China. Even more, it may make the moral hazard problem more serious. Lastly, some empirical analyses have proved that perhaps "overseas listing" is the real reason for companies to purchase D&O insurance.Finally, based on the legal analysis of all above, especially on the analysis of causes of D&O insurance’s slow development in China, this article provided several suggestions from different angles, which include the feasibility researches of compulsory insurance, suggestions of consummating the supporting legal system, suggestions of optimizing the corporate governance environment, and suggestions of designing more rational contracts. So that we can expect one day the D&O insurance can be fully functional in our country. |
