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.
Copyright © 2019 ALM Media Properties, LLC. All Rights Reserved.