DIRECTORS & OFFICERS LIABILITY INSURANCE

Our policy is more than just Directors and Officers Liability Insurance.

With the SeaFirst Insurance Brokers Management Liability Program, we provide you with an enhanced policy.

Privately held, Publicly listed or Not-for-Profit entities all have exposures to claims arising from decisions made by their Board members. In this day and age of Corporate responsibility, is your Company protected from financial losses caused by your Board? Do you have Corporate Indemnity agreements protecting your Board members? How will you fund these losses?

Do you know what your other Board members are involved with? Are you confident that all meetings are recorded properly? Do you have the necessary funds to defend yourself if the Company is sued? Are your policy and procedures manuals distributed to all employees? Does your Not-for-Profit entity have the funds available to continue operating if your (paid) Executive Director is incapacitated or dies?

If you can’t answer Yes to all of these questions, you need SeaFirst D & O Insurance!!

What Our Policy Pays For

• A loss arising from any Claim made against your Directors & Officers or Company for a Wrongful Act.
• The policy will also pay for any Employment Wrongful Act.

Definitions

Claim: A demand for compensation received by a Director or Officer in respect of any actual or alleged Wrongful Act.

Director or Officer: A person that was or is a Director or Officer of the Company. Any employee acting in a managerial capacity. Any person proven to be a shadow director of the company.

Employment Wrongful Act: Discrimination or harassment of an employee. Wrongful termination, demotion, refusal to promote or refusal to hire an employee. Retaliatory action taken against an employee due to the employee exercising their rights under applicable law.

Key Features

• Comprehensive Definition of “Directors & Officers”
• Employment Practices Liability
• Fiduciary Liability
• Advancement of Defense Costs
• 2 Months Extended Reporting Period
• 2 Months Run-off Cover for Retired D & O’s
• Comprehensive Cover of Not-For Profit Outside Directorship
• Cover for Subsidiaries
• Cover for Liabilities for Spouses
• Cover for Costs Incurred in Respect of Pollution Defense
• Cover for Costs Incurred in Respect of Loss of Reputation
• Cover for Errors & Omissions Liability
• Key-Man Insurance

Read on for some examples of cases levied against both Private Companies and Not-for Profit organizations and the results…

PRIVATE COMPANIES CASES
 

Name of Claimant - Kenneth Alexander

Claimant’s Status - Son “Kenneth” of the Defendant Ranch which was owned by Kenneth, his brother and father.

Type of Allegations - The defendant ranch was a typical closely held father and son farming and ranching corporation. The father (Keith) owned 50% of the equity and voting shares of the corporation while the sons (Kenneth and Clay) each owned 25%.
Oppressive actions of the directors, Keith (dad) and Clay (other brother) with respect to the operations of the farm. Plaintiff Kenneth claimed for back wages and quantum meruit for services provided.

Relief Granted - “The Court held that “Special considerations apply to small, closely held family corporations and it is not necessary that actual malice or "oppression" in the narrow sense of the word be proved. It is sufficient if it is proven that the conduct of the majority shareholders has the effect of unfairly disregarding or prejudicing the interests of the minority shareholders.” The Court found that Kenneth was oppressed by the actions of his father and brother as the two of them acted as though he no longer was a part of the farming operations. Selling the cattle, for example, was deemed to be an oppressive action. Remedy: an order requiring the defendants to purchase Kenneth's shares in the corporation at fair value and pay back his shareholder loans forthwith.

Miscellaneous Notes - Case name: Alexander v. Bar SP Ranches Ltd. 1999 CarswellSask 936 See also: Wind Ridge Farms Ltd., v. Quadra Group Investments Ltd., [1999] S.J. No. 602 (Q.L.) and Eiserman v. Ara Farms Ltd. and Eiserman (1988), 67 Sask. R. 1 for cases related to family farms.

Name of Claimant - Maria Teresa Clappa aka Mary Clappa

Claimant’s Status - Business and romantic partner of the Defendant

Type of Allegations - Plaintiff and Defendant were 50-50 shareholders and romantically involved. Defendant had executive level responsibilities and plaintiff had support level responsibilities. Over fourteen-year period, defendant earned $175,488 more than the plaintiff in salary. Plaintiff claimed that her acquiescence in the remuneration imbalance was because of her romantic relationship with defendant. Plaintiff alleged she had lent Defendant approximately $150,000 through the company in “wages.”

Plaintiff claimed that remuneration imbalance reduced the value of her shares and brought an application for oppression. Plaintiff applied for relief citing that the Defendant’s conduct was “oppressive”.

Relief Granted - Court held that the Plaintiff was not “oppressed” as she had a 50% stake in the company. Plaintiff did not prove oppression because to do so she must prove that the defendant's conduct was an attempt to reduce her entitlement to share in profits and her damages were not suffered in her capacity as shareholder.

Miscellaneous Notes - Case name: Clappa v. McPherson 2005 CarswellBC 1929

Name of Claimant - Allen Gregory Pasnak and Double J. Investments Ltd.

Claimant’s Status - The Plaintiffs were the business partners (the person and corporation) of the Defendants.

Type of Allegations - Plaintiff and defendant were in business through vehicles of four companies. Both held shares in the companies either personally or through their personal companies. Both wanted to bring business relationship to end and agreed that plaintiff or D Ltd. could purchase defendant's shares in all four companies but could not agree upon purchase price of shares. Plaintiff alleged that actions of Defendant entitled him to purchase shares at a lower price as those actions lowered the value of one of the companies.

 Relief Granted - Action dismissed. Held: “The authorities are clear that a shareholder must show direct and special harm in order to maintain a personal action for oppression, otherwise he must seek leave to bring a derivative action in the name of the company.

Miscellaneous Notes - Case name: Pasnak v. Chura, [2003] B.C.J. No. 1591, 2003 BCSC 782 (B.C. S.C.), rev'd in part [2004] B.C.J. No. 790, 2004 BCCA 221

Name of Claimant - Scott Elliott, Andrew Brink

Claimant’s Status - Former minority shareholder and employee of Defendant Opticom Technologies Inc.

Type of Allegations - Plaintiffs and Defendant went into business with Mr. Boyd who owned controlling interest in Defendant corporation. Plaintiffs alleged that the conduct or acts of the Defendants were oppressive or unfairly prejudicial, and sought relief under the Business Corporations Act, S.B.C. 2002, c. 57. In the alternative, they sought damages for breach of agreement.

Relief Granted - Held: there was no oppressive conduct as there was no lack of probity or lack of honest and fair dealing on the part of the Company or Mr. Boyd, which are necessary for oppressive conduct. However, the act of the Company in terminating the employment of Elliott and Brink was unfairly prejudicial to them as shareholders of the Company as it was not in the best interests of the Company to terminate their employment. Remedy granted: the Defendants were ordered to purchase the Plaintiffs' shares for a price equal to their value as at December 28, 2001 (the date the Plaintiffs advised the Defendants of their claims).

Miscellaneous Notes - Case name: Elliott v. Opticom Technologies Inc. 2005 CarswellBC 843 (B.C.S.C.)

Name of Claimant - Brent Emerson Connors, Larry Freeman, Paul Marley and Peter Jones, and Starcom International Optics Corporation (incorrectly named)

Claimant’s Status - Minority shareholders and the subject corporation (found to be incorrectly named)

Type of Allegations - A declaration that the acts of the defendants purporting to act as directors "were unlawful, in breach of fiduciary duty and void", including their purported appointment as directors, the issuance of the 35 million shares to themselves or related companies, and the postponement of the general meeting.

They sought the delivery of all assets of the Company, including possession of its office and records in Vancouver, to the directors who were elected at the members' meeting held on December 15. Oppressive but not derivative pleadings.

Relief Granted - The Court declared all acts taken by the defendants purporting to act as directors were invalid including in consolidating their "control" position of the company.

The Court declared the act of the defendants to cancel shares was invalid.

Miscellaneous Notes - Case name: Starcom International Optics Corp. v. MacDonald 1994 CarswellBC 2247

Name of Claimant - Gracia Tracy

Claimant’s Status - Claimants had borrowed money from the Defendant and alleged criminal rates of interest. She also sued the directors and officers personally.

Type of Allegations - Defendant company charged criminal rates of interest to the Claimants. The personal defendants, Tim Latimer and Marc Arcand were officers and directors of the corporate defendants. Directors were alleged to have “directed that wrongful thing [high rates of interest] to be done.“

Relief Granted - Court “pierced” the “corporate veil” and found the directors and officers personally liable and ordered a Mareva injunction against them.

Miscellaneous Notes – Case name: Tracy v. Instaloans Financial Solutions Centres (B.C.) Ltd. 2006 Carswell BC 2023. Not sure if the defendant was a private organization – no mention either way.

Name of Claimant - Terry Andersen

Claimant’s Status - Former employee of Defendant and Defendant company

Type of Allegations - Claimant alleged that Defendant sexually harassed her by calling her a derogatory, gender-specific name (he called her a “bitch” and said she was “too anal” and “too tough” in her business dealings).

Relief Granted - Action dismissed: The types of allegations regarding questions about her personal life and unpleasant comments did not meet the standard for sexual discrimination. The comment about her being a bitch was “inappropriate and in bad taste” but not “egregious nor virulent”.

Miscellaneous Notes – Andersen v Angell and another, 2006 BCHRT 25

NOT-FOR-PROFIT SECTOR CASES

Name of Claimant - *Withheld*

Claimant’s Status - Former employee of Strata Council

Type of Allegations - Wrongful dismissal. Discrimination based on age and disability.

Relief Granted - Settled prior to BC Human Rights Tribunal Hearing

Miscellaneous Notes – Case handled by counsel at DWF.

Name of Claimant - *Withheld*

Claimant’s Status - Strata owner’s claim against the Strata President.

Type of Allegations - Strata President failed to disclose minutes of strata council meetings which showed that the building was suffering from premature envelope failure to a prospective purchaser. Negligent misrepresentation for stating that the subject building was a "beautiful building".

Relief Granted - Settled out of Court

Miscellaneous Notes – Case handled by counsel at DWF.

Name of Claimant - *Withheld*

Claimant’s Status – Strata Owners claim against the Strata Council

Type of Allegations - The plaintiffs were the owners of a unit in the strata complex. The plaintiffs installed a hot tub in the basement of their unit. The plaintiffs alleged that the council members acted in an unfairly prejudicial manner in retaining a lawyer to demand that it be removed because it was trespassing on the common property. The owners also alleged that they were harassed by the council over the issue.

Relief Granted - Pending

Miscellaneous Notes – Case handled by counsel at DWF.

Name of Claimant - Dr. Yeung

Claimant’s Status – Owner in the Defendant strata

Type of Allegations - Dr. Yeung carried on a medical practice in the corporate strata (also a defendant) building. Dr. Yeung erected a sign, which was in contravention of the strata bylaws, and strata council removed it. Dr. Yeung sued the strata claiming their actions in removing the sign were invalid, oppressive and unfairly prejudicial, and as a result she suffered damages in terms of decreased walk in traffic.

Relief Granted - Action dismissed: the Defendant was not acting unfairly and in fact was effectively striving to protect the common interests which stipulated that each owner was entitled to an equal share in the storefront space.

Miscellaneous Notes – Case name: AW-NM Ventures Ltd. v. Strata Plan LMD2856 2004 CarswellBC 1110. Case handled by counsel at DWF.

Name of Claimant - *Withheld*

Claimant’s Status – Applicant for services provided by company.

Type of Allegations - Discrimination on the grounds of race. Claimant was an applicant for dispatch services, which were provided by a taxi company. Claimant filed a human rights complaint against the company and one of the directors alleging that he was not given the services because of his ethnic origin.

Relief Granted - Pending  

Miscellaneous Notes – Case handled by counsel at DWF.

Name of Claimant - Oliver Sabados and Teodora Sabados

Claimant’s Status – Unit owners in the Defendant strata

Type of Allegations – The Claimants/owners alleged they were discriminated against by the strata and the Strata President on the grounds of place of origin. They claim that the delay in performing certain necessary repairs to the unit, an incident between the owners and the Strata council regarding the fire alarm and generally acrimonious relations were evidence on discrimination.

Relief Granted – Held: Claim dismissed. The Tribunal held that the Claimants failed to prove any discrimination for two reasons. First, they did not prove that they were treated differently than other residents would have been treated in similar circumstances. Second, they didn’t prove that their place of origin had anything to do with how they were treated.

Miscellaneous Notes –Case name: Sabados and Sabados v. KAS 2567 and others, 2006 BCHRT 24.

Name of Claimant - Donna Storer and Betty Ainscough

Claimants Status - Foster children of the Defendant Pastor

Type of Allegations - Wrongful and intentional physical and sexual assault

Relief Granted – Settled out of Court.

Miscellaneous Notes – No reported case.