Tata-AIG General Insurance along with New India Assurance and ICICI Lombard have refused to pay for the claim filed by IT giant- Satyam Computer Services under a Directors & Officers liability insurance policy involving an insured sum of Rs 480 crore.
Directors & Officers Liability Policy protects a company’s directors and officers against legal costs incurred by them in defending allegations, suits for wrongful acts and any awards granted against them, including out of court settlements. However, the policy excludes fraud and dishonest acts committed by the directors and criminal actions.
Satyam Computer had filed claims with TATA AIG General after receiving notices from several regulatory authorities, Class Action suits along with letters from its directors and officers on the likelihood of potential claims against them and requesting coverage under the D&O Liability policy.
But TATA AIG General has disputed the claim and has asked for additional documentation and information, according to a Satyam filing on the Bombay Stock Exchange. Satyam is facing 12 class action suits. According to an insurance official, the board of directors of Satyam, won’t be able to enjoy the comfort of D&O insurance cover till they are proven innocent.
Satyam’s D&O policy is divided in three layers among insurers. The first layer is of approximately $30 million (around Rs 120 crore) and is provided by New India Assurance and Tata-AIG General.
This means, if the claim is more than Rs 120 crore, then the second layer gets triggered, which is provided by ICICI Lombard and New India Assurance. The third layer is underwritten by Tata-AIG and New India Assurance.
Tata-AIG General refused to respond despite several attempts.