While a crude form of errors and omissions insurance for corporate directors and officers may have been available through underwriters at Lloyd’s as early as the 1930s, serious interest in insuring directors and officers against personal liability did not occur until 1939. In New York Dock Co. v. McCollom, 16 NYS 2d 844 (1939), the court held that the corporation could not reimburse its directors when they had in fact successfully defended against a shareholder derivative action. This decision caused quite a stir. The idea that the corporation’s directors would be out-of- pocket when they clearly prevailed in court sent shock waves through many board rooms. The outcome of McCollom was generally credited with the enactment in 1941 of the first corporate-indemnification statutes. While this was surely good news for directors and officers, it undoubtedly was also welcomed by underwriters in London, who had developed a D&O insurance product for which no real market had previously existed.
Even so, corporate interest in D&O insurance was slow to develop. By 1960 only a small number of D&O liability policies had been written, all of which had been developed by a handful of brokers and wholesalers through placement into the London Market. Few insurance and business professionals understood D&O insurance or even knew that such coverage existed. In 1962 and 1963, two domestic insurers, the St. Paul and AIG, entered the D&O market for the first time. Several other domestic insurers also entered, and then left the market during the next few years. Most of the business, either through direct placements or as reinsurance, continued to be placed in London.
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