The board of directors of Satyam Computer Services, other than its founders B Ramalinga Raju and Rama Raju, won't be able to enjoy the comfort of directors and officers' liability insurance till they are proven innocent.
Ramalinga Raju and Rama Raju have become ineligible for the insurance cover against losses arising from legal suits as they were the prime perpetrators of the financial fraud at the Hyderabad-based software services company.
Satyam has purchased directors and officers’ liability insurance policy for a value of approximately Rs 480 crore from Tata-AIG General Insurance, New India Assurance and ICICI Lombard General Insurance.
Directors and officers’ liability policy covers against any loss that the organisation may incur, on account of mistaken actions taken in their individual capacity as directors and officers in pursuance of their duties.
The policy will pay for legal expenses to defend these directors also in case class suits filed against them. However the policy excludes fraud and dishonest acts committed by the directors and criminal actions.
“Since Raju has confessed, the legal expenses nor the claims against him is payable. On the same lines, if it is proved that other directors on the board were not party to this fraud then their legal expenses and claims will be paid,” said a top insurance company official.
The Satyam policy is divided in three layers. The first layer is of approximately $30 million (Rs 120 crore) and is provided by New India Assurance and Tata-AIG. If the claim is more than Rs 120 crore, then the second layer gets triggered, which will be provided by ICICI Lombard and New India Assurance. The third layer is underwritten by Tata-AIG and New India Assurance.