Vancouver Lawyers Advising on Director’s Liability

As fiduciaries, corporate directors have several legal and ethical duties, including the statute-mandated obligation to act in the corporation’s best interests. To protect themselves from personal liability in legal actions, directors often obtain Directors & Officers (D&O) Liability Insurance. However, as with any insurance policy, disputes can arise between insurance companies and directors about the availability of coverage under D&O policies.

The insurance litigation lawyers at Meridian Law Group provide trusted advice to parties on either side of director’s liability disputes. The firm represents insureds and insurers in D&O-related claims and takes swift action to protect a party’s rights and preserve their available legal options.

Duties of a Corporate Director in British Columbia

Under section 142(1) of the Business Corporations Act of British Columbia, a corporate director (when exercising their powers or performing their functions as a director) must do the following:

  • Act honestly and in good faith with a view to the best interests of the company;
  • Exercise the care, diligence, and skill that a reasonably prudent individual would exercise in comparable circumstances;
  • Act in accordance with the Business Corporations Act and its regulations; and
  • Comply with the corporation’s memorandum and articles.

Similar duties are found throughout other provincial corporate legislation and the federal Canada Business Corporations Act. These general duties are a broad descriptor for the many obligations placed on directors, who are expected to act as fiduciaries for the corporation. Within those obligations are the requirements to avoid conflicts of interest or take personal advantage of the corporation’s opportunities, comply with all laws, exercise diligent oversight of the corporation’s finances, and appoint and oversee corporate officers.

Corporate Indemnification

Under the Canada Business Corporations Act and British Columbia’s Business Corporations Act, a corporation may indemnify a director for costs they reasonably incur in a legal proceeding, so long as the director met their fiduciary duties to the corporation and believed their conduct was lawful. A corporation may also be legally required to indemnify a director of the expenses they incur in defending against a claim if the director was wholly or substantially successful in the case on its merits.

However, a corporation may not indemnify a director in a claim where the corporation is the plaintiff (except, in some circumstances, with court approval).

Claims Under Directors & Officers (D&O) Insurance

Directors & Officers (D&O) Liability Insurance can mitigate the risk of personal liability faced by a corporate director when corporate indemnification is unavailable and the director is accused of failing to act in the corporation’s best interests or otherwise meet their duties as fiduciary.

Depending on the terms of the particular policy, D&O insurance policies may offer protection against the following claims:

  • Breach of fiduciary duty;
  • Conflict of interest (or taking a personal advantage/benefit from a corporate opportunity);
  • Non-compliance with the applicable corporate, regulatory, and securities laws, including the Business Corporations Act and its regulations;
  • Failure to comply with the corporation’s governance documents or policies, including the Articles of Incorporation, memorandum, and by-laws;
  • Employment standards issues and other employment-related matters, including wrongful or constructive dismissal;
  • Workplace health and safety issues, including workplace injuries, harassment, and discrimination; and
  • Mismanagement of the corporation’s finances.

Grounds for Denial Under D&O Policies

It’s vital to note that the terms and exclusions of Directors & Officers Liability Insurance policies can vary greatly. Some policies may include particular exclusions relating to regulatory violations, issues arising from bankruptcy mismanagement, or pandemic-related concerns.

Other common grounds for denial of a D&O claim include:

  • Misrepresentation or falsified information provided by the director at the time they obtained their policy or at the time a claim was made;
  • Intentional wrongdoing by the director, including criminal or fraudulent acts;
  • Failing to notify the insurer of the loss and/or failing to cooperate with the insurer’s investigation of the claim (both would be contraventions of the insurance policy);
  • Situations where a director may have personally profited at the corporation’s expense may be subject to an exclusion under a D&O policy.

Innovative Legal Solutions to Directors and Insurers in D&O Claims

Director’s liability claims can involve a myriad of legal and evidentiary considerations with lasting reputational and financial impacts. It is critical for parties to consult with experienced insurance litigation counsel to ensure their rights and legal remedies are preserved.

Meridian Law Group represents directors and insurance companies in disputes involving D&O liability policies. Clients benefit from the firm’s established reputation as a leading insurance litigation firm in B.C. and receive trusted advice on policy interpretation, including exclusion clauses and claim denial.

Contact Meridian Law Group in Vancouver for Robust Legal Solutions in Director’s Liability Disputes

The team at Meridian Law Group has been a cornerstone of British Columbia’s insurance law bar since 1988 and has represented some of the largest insurance companies in Canada. The firm provides cutting-edge advice and legal solutions to insurers and policyholders in director’s liability disputes in any forum, including negotiation, mediation, arbitration, and litigation.

Meridian Law Group is located in the prominent Nelson Square Building across from the law courts in downtown Vancouver and serves clients across B.C. The firm also proudly represents clients across the rest of Canada and worldwide. To schedule a consultation with the firm’s insurance law team, contact us at (604) 687-2277 or online.