D and O Insurance and Arbitration

Directors and officers ("D&O") are required to act in a good faith and in the best interests of the corporation and to ensure that, the corporation is managed in accordance with the corporation's articles of incorporation and internal by-laws. D&O are personally liable for actions committed by the corporation within their scope of authority, and their own personal assets are at the risk in the event of a lawsuit against the corporation and its management or corporate insolvency. Today's complex business, legal and regulatory environment have increased the number of disputes involving the personal liability of D&O and D&O insurance, and the option of the more efficient, flexible, expert, and enforceable dispute resolution mechanisms, becomes the substantial interest of the parties involved. In this article, we discuss the general principles of D&O liability and D&O insurance, and relevant court cases concerning D&O liability and insurance coverage disputes in EU Law. Having in mind basic characteristics of modern insurance regulations, in particular, the need to protect a policyholders' interests and insurance customers and the premise that classic (commercial) arbitration is not a priori suitable for D&O insurance disputes, the author advocates introduction of specific integrated arbitration proceedings for D&O insurance cases. By assessing arbitration proceedings in D&O insurance, this analyze allows us to draw conclusion on whether the resolution of D&O insurance disputes by means of arbitration should be considered more often, or court litigation is more suitable for D&O insurance cases.