You can insure your house against fire damage. Insurance against third-party liability for damage by motorized traffic is even mandatory. Is it wise to insure against possible liability on account of a position as managing director or a position supervisory director?
Internal and external liability
This question requires a differentiated answer. Directors and supervisors can be held liable both internally and externally for damage they cause in the performance of their job. There is sometimes a misperception that the risk of being held liable in this way is very high. This is not the case. Only if a director makes a serious mistake on account of which the company or foundation suffers damage can he be held liable for it under the agreement for services. This is internal liability. In particular if there is question of serious culpability (gross negligence), liability for damage can be assumed. If a director or supervisor is held liable by a party outside the company, it is called external liability. According to previous decisions of the Supreme Court, there is only question of internal liability in exceptional cases. External liability is even rarer, except in a bankruptcy situation.
It so happens that most insurance policies do not pay compensation in the event of intent or gross negligence. The bandwidth of cases in which an insurance policy can pay is consequently rather narrow. For in the event of damage on account of a lesser fault, the directors and supervisors concerned cannot be held liable. So in that case you do not need insurance. If there is question of intent or gross negligence, most policies do not pay. Well, there is not much left to effectively insure then. Directors and supervisors who consider taking out insurance against the consequences of directors’ and officers’ liability consequently should carefully examine the policy as to the scope of the coverage provided.
A point requiring attention is also that it is more expensive to insure directors’ and officers’ liability in Curaçao than it is in the Netherlands. The joint insurance companies in the Netherlands have created a pool. This makes it possible to provide good coverage at a relatively low price. Directors and supervisors in Curaçao cannot draw on this pool. The consequence is that the ratio between the coverage provided and the costs for the premium in our country is relatively less favorable.
It is possible, of course, that you as director or supervisor are held liable for damage you have not caused at all or that you cannot be held responsible for at all. Meanwhile, you are facing the costs of the defense. Insurance against such costs may certainly be useful.
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