The Severability Clause in D&O policies*
Within the Dutch insurance market, there is increasing talk about the desirability of including the Severability Clause in D&O policies. The purpose of this clause is to guarantee the policy’s coverage for so-called ‘innocent’ directors and supervisory directors who are held personally liable. These ‘innocent’ executives must be guarded against the consequences of non disclosure or of being given incorrect information prior to effecting the insurance.
The Severability Clause is frequently used in American and British D&O policies.
Our experience is that the clause cannot simply be incorporated into policies that are subject to Dutch law. The Severability Clause seeks harmonization with British company and insurance law, which deviates considerably from Dutch company and insurance law. If the Severability Clause is to be used in a policy subject to Dutch law, it is advisable to arrange special provisions. What these provisions should be depends on the specific case in question. We would be happy to advise you on this issue.
* D&O is the abbreviation for Directors and Officers. In the Netherlands, these policies are also called BCA policies: “Bestuurders- en Commissarissen Aansprakelijkheid” insurance.