Insurers and (supervisory) directors: check your D&O insurance
September 18, 2025Author: Caroline Fiévez
Insurers and (supervisory) directors: check your D&O insurance.
A D&O insurance policy covers the liability of directors, supervisory board members, of de facto policymakers and of officers. However, D&O policies are often neglected – both by the insurers offering them and by the legal entities purchasing coverage for their directors and supervisory directors. Both parties frequently give the impression of window dressing: they provide or buy something, but what exactly is covered and what not, is not always sufficiently clear. In doing so, both parties may be leaving money on the table, either by charging a premium too low or by paying too high a premium.
The use of foreign definitions
Insurers often use terms in their policy conditions borrowed from foreign jurisdictions, which do not always align with local insurance law. It is not uncommon for insurers to copy the wording of their foreign reinsurers. As a result, a definition in the policy may refer to foreign law, for example British law, but sometimes the policy refers to a law without mentioning the country of origin thereof. This is not only impractical but also undesirable. In the event of a dispute, lawyers may then have to interpret policy terms defined according to foreign law, and possibly even requiring advice from a foreign lawyer. This leads to unnecessary costs, which could easily be avoided if the insurer drafted its own definitions rather than copying a reinsurer’s wording.
Dispute resolution: costly (international) arbitration
Significant costs also arise when the policy stipulates that disputes over interpretation must be resolved through arbitration under foreign law. Arbitration can be costly because, in addition to attorney’s fees, the arbitrators’ fees must be paid. It is questionable whether either the insurer or the insured company will feel comfortable with arbitration under foreign law – or even with arbitration at all. It is usually significantly more expensive than litigation before the Sint Maarten courts. For both insurers and insured companies, local court proceedings are often simpler and more cost-effective.
Corporate governance and company’s risk profile
Insurers may also miss out on premium income by failing to adequately assess the corporate governance of the insured company before granting coverage or before the policy renewal. This results in an incomplete assessment of the company’s risk profile.
Companies should guard against opportunism by their directors: if the company’s corporate governance is weak, directors may opt for excessively high coverage limits to better protect their personal assets in case of liability. This raises premiums and is therefore not in the interests of the company or its shareholders.
Tailor made insurance coverage
Companies and directors seeking protection against directors’ liability often accept the first offer without reviewing alternatives, comparing policy conditions, or seeking legal advice. Companies are not sufficiently aware of ambiguities in policy wording, often due to the number of terms defined by foreign law. These ambiguities can easily be resolved in consultation with the insurer by requesting that terms be redefined in a manner consistent with local law.
In addition to clarifying policy wording, companies must also ensure they are not overpaying for coverage. For example, by avoiding unnecessary extensions. One such example is coverage for a director’s spouse in an enforcement dispute concerning directors’ liability. If the director is married under Sint Maarten law, such coverage may not always be relevant.
10-year period run-off risk
A good D&O policy should also cover potential run-off risk. This means that the event giving rise to liability occurs during the policy period, but the damage only becomes apparent after the policy has expired – sometimes years later. Make sure that run-off risk is covered for a sufficiently long period, e.g., ten years.
Specify the defense costs
Attention must also be paid to the coverage of defense costs for the director. Most policies do not specify the insured amount available for defense costs and for liability damages. This can disadvantage the director if, for example, a bankruptcy trustee seizes the entire insured amount sum, leaving no funds available for defense. Yet the insurer itself also has an interest in ensuring proper defense. It may therefore be advisable to specify in the policy separate maximum amounts for defense costs and for liability damages. Another option would be to stipulate that the insurer pays the lawyer directly, so that the director does not hold a claim against the insurer which could be seized. The pros and cons of these solutions should be weighed by each company individually.
Conclusion
Limit costs and risks. Insurers, companies and their director should pay closer attention to the D&O insurance.
Disclaimer:
This blog provides general information and is not intended as legal advice. BZSE strongly recommends seeking personalized legal counsel based on your specific circumstances before making any decisions or taking action.
September 10, 2025
Caroline Fiévez,
attorney at BZSE Attorneys at Law/Tax Lawyers
More articles →
A D&O insurance policy covers the liability of directors, supervisory board members, of de facto policymakers and of officers. However, D&O policies are often neglected – both by the insurers offering them and by the legal entities purchasing coverage for their directors and supervisory directors. Both parties frequently give the impression of window dressing: they provide or buy something, but what exactly is covered and what not, is not always sufficiently clear. In doing so, both parties may be leaving money on the table, either by charging a premium too low or by paying too high a premium.
The use of foreign definitions
Insurers often use terms in their policy conditions borrowed from foreign jurisdictions, which do not always align with local insurance law. It is not uncommon for insurers to copy the wording of their foreign reinsurers. As a result, a definition in the policy may refer to foreign law, for example British law, but sometimes the policy refers to a law without mentioning the country of origin thereof. This is not only impractical but also undesirable. In the event of a dispute, lawyers may then have to interpret policy terms defined according to foreign law, and possibly even requiring advice from a foreign lawyer. This leads to unnecessary costs, which could easily be avoided if the insurer drafted its own definitions rather than copying a reinsurer’s wording.
Dispute resolution: costly (international) arbitration
Significant costs also arise when the policy stipulates that disputes over interpretation must be resolved through arbitration under foreign law. Arbitration can be costly because, in addition to attorney’s fees, the arbitrators’ fees must be paid. It is questionable whether either the insurer or the insured company will feel comfortable with arbitration under foreign law – or even with arbitration at all. It is usually significantly more expensive than litigation before the Sint Maarten courts. For both insurers and insured companies, local court proceedings are often simpler and more cost-effective.
Corporate governance and company’s risk profile
Insurers may also miss out on premium income by failing to adequately assess the corporate governance of the insured company before granting coverage or before the policy renewal. This results in an incomplete assessment of the company’s risk profile.
Companies should guard against opportunism by their directors: if the company’s corporate governance is weak, directors may opt for excessively high coverage limits to better protect their personal assets in case of liability. This raises premiums and is therefore not in the interests of the company or its shareholders.
Tailor made insurance coverage
Companies and directors seeking protection against directors’ liability often accept the first offer without reviewing alternatives, comparing policy conditions, or seeking legal advice. Companies are not sufficiently aware of ambiguities in policy wording, often due to the number of terms defined by foreign law. These ambiguities can easily be resolved in consultation with the insurer by requesting that terms be redefined in a manner consistent with local law.
In addition to clarifying policy wording, companies must also ensure they are not overpaying for coverage. For example, by avoiding unnecessary extensions. One such example is coverage for a director’s spouse in an enforcement dispute concerning directors’ liability. If the director is married under Sint Maarten law, such coverage may not always be relevant.
10-year period run-off risk
A good D&O policy should also cover potential run-off risk. This means that the event giving rise to liability occurs during the policy period, but the damage only becomes apparent after the policy has expired – sometimes years later. Make sure that run-off risk is covered for a sufficiently long period, e.g., ten years.
Specify the defense costs
Attention must also be paid to the coverage of defense costs for the director. Most policies do not specify the insured amount available for defense costs and for liability damages. This can disadvantage the director if, for example, a bankruptcy trustee seizes the entire insured amount sum, leaving no funds available for defense. Yet the insurer itself also has an interest in ensuring proper defense. It may therefore be advisable to specify in the policy separate maximum amounts for defense costs and for liability damages. Another option would be to stipulate that the insurer pays the lawyer directly, so that the director does not hold a claim against the insurer which could be seized. The pros and cons of these solutions should be weighed by each company individually.
Conclusion
Limit costs and risks. Insurers, companies and their director should pay closer attention to the D&O insurance.
Disclaimer:
This blog provides general information and is not intended as legal advice. BZSE strongly recommends seeking personalized legal counsel based on your specific circumstances before making any decisions or taking action.
September 10, 2025
Caroline Fiévez,
attorney at BZSE Attorneys at Law/Tax Lawyers
More articles →
