Study On The Coverage Of Directors And Officers Liability Insurance In China

Directors and Officers Liability Insurance(hereinafter referred to as “D&O Insurance”)refers to the insurance whose subject matter is the civil liability for compensation arising from the misconduct of corporate directors,supervisors,and senior officers(hereinafter referred to as “D&O”)in performing their duties.D&O Insurance belongs to professional liability insurance.Under the legal background that D&O's obligations and duties have been constantly emphasized,D&O Insurance has also continuously changed and developed following the times and trends.The purpose of D&O Insurance is to help D&O resist professional risks arising from the performance of their duties,and also to provide an external risk control and supervision mechanism for the company where D&O take offices.As the core of D&O Insurance,the coverage of D&O Insurance directly determines the rights and obligations of both parties to the D&O Insurance contract.The determination of the coverage of D&O Insurance can enable D&O to prejudge their own behavior,identify what kind of behavior they perform in their work is an act that can transfer liability risk,and eliminate the worries for D&O's management activities.From this perspective,the determination of D&O Insurance coverage can help to attract outstanding management talents and motivate them to carry out innovative business activities for the best interests of the company in which they take offices.Without doubt,we must also avoid making D&O Insurance a tool for the D&O to avoid liability while discussing the coverage of D&O Insurance.China's first D&O Insurance was jointly launched by Chubb and Ping An Insurance.After more than ten years of development in China,it should have become an insurance product with considerable market potential,but its current development status in China is not promising,which is completely different from the situation of D&O Insurance in the insurance market of developed countries.The main reason lies in the mismatch between D&O Insurance as a “foreign product” and China's legal system and practice.During the localization of D&O Insurance,it is particularly important to design D&O Insurance products that are suitable for China's insurance market.The most critical aspect in determining whether an insurance product is suitable for the Chinese market is the insurance coverage,because the fundamental basis for D&O to decide on whether to purchase D&O Insurance is whether the insurance coverage stipulated in the insurance policy meets their needs.There are two main factors that can affect the insurance coverage,namely,the regulations of existing regulatory legal documents and the clauses in insurance policies.At present,the problems faced in regulating the coverage of China's D&O Insurance also exist in these two aspects.Specifically,the clauses of D&O Insurance policies are not clear and there is not enough legal support for the time being.These have caused D&O Insurance during its development in China to fail to meet the directors' needs of avoiding risks in the performance of their duties.In order to solve the above problems and clearly define the coverage of D&O Insurance to promote the development of D&O Insurance,suggestions will be offered on the definition of the coverage of D&O Insurance from the following two aspects.First of all,it is necessary to perfect the regulations in respect of liability insurance in the Insurance Law of the People's Republic of China(hereinafter referred to as the “Insurance Law”),and add regulations on D&O Insurance in the Insurance Law.Secondly,improvements should be made in the clauses of the D&O Insurance policies.To be specific,the coverage of D&O Insurance should be appropriately expanded first;second,misconduct should be defined accurately.The identification of misconduct is the core concept of the D&O Insurance coverage.When identifying misconduct,the focus should be on clear determination of duty behavior.Third,the excluded liability must be explicitly determined.Through the research in this paper,it is expected to provide a reference for the smooth development of D&O Insurance in China.