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Call Now: 904-383-7448A corporation may purchase and maintain insurance on behalf of an individual who is a director, officer, employee, or agent of the corporation or who, while a director, officer, employee, or agent of the corporation, serves at the corporation's request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity against liability asserted against or incurred by him or her in that capacity or arising from his or her status as a director, officer, employee, or agent, whether or not the corporation would have power to indemnify or advance expenses to him or her against the same liability under this part.
(Code 1981, §14-2-858, enacted by Ga. L. 1988, p. 1070, § 1; Ga. L. 1996, p. 1203, § 5.)
- For article, "Corporate Governance in the Aftermath of the Insurance Crisis," see 39 Emory L.J. 1155 (1990).
Source: Model Act, § 8.58.
Section 14-2-858 authorizes a corporation to purchase and maintain insurance on behalf of directors, officers, employees, or agents against liabilities imposed on them by reason of actions in their official capacity or arising from their service to the corporation or another entity at the corporation's request. Insurance is not limited to claims against which corporations are entitled to indemnify under this part. This insurance, usually referred to as "D&O Liability Insurance," provides a useful supplement to the rights of indemnification created by this part, providing a source of reimbursement for corporations who indemnify directors and others for conduct covered by the insurance, and protecting the insureds against the corporation's failure to pay indemnification required or permitted by this part. On the other hand, policies do not cover uninsurable events like self-dealing, bad faith, knowing violations of the securities acts, or other willful misconduct. See generally Johnston, Corporate Indemnification and Liability Insurance, 33 Bus. Law. 1993 (1978); Hinsey, The New Lloyd's Policy Form for Directors' and Officers' Liability Insurance - An Analysis, 33 Bus. Law. 1961 (1978).
The fact that insurance policies are issued by a partly or wholly owned subsidiary does not convert them into indemnification agreements that are subject to the restrictions on indemnification imposed by this part. The development of alternative insurance companies, owned by groups of policy-holders, has been one response to the liability crisis of the 1980's. Nothing in this section precludes such insurance, as long as the insurer is subject to normal economic constraints in writing liability policies.
Note to 1996 Amendment This section was amended to conform to 1994 amendments to section 8.57 of the Revised Model Business Corporation Act. See 49 Bus. Law. 741 (Feb. 1994) and 49 Bus. Law. 1823 (Aug. 1994). The Model Act's official comments should be read in interpreting this section. The changes are primarily stylistic. Provisions authorizing indemnification or advance of funds for expenses of non-officer employees or agents were deleted, and now appear in Section 14-2-859.
Cross-References "Director" defined, see § 14-2-850. "Liability" defined, see § 14-2-850. Mandatory indemnification, see § 14-2-852. Standard for indemnification, see § 14-2-851.
Cited in Service Corp. Int'l v. H.M. Patterson & Son, 263 Ga. 412, 434 S.E.2d 455 (1993).
- 18B Am. Jur. 2d, Corporations, § 1625 et seq.
- Insurance: construction of policy or bond indemnifying directors or officers of corporation for expenses incurred in defending actions brought against them in their capacity as such, 49 A.L.R.3d 1250.
Total Results: 1
Court: Supreme Court of Georgia | Date Filed: 1993-09-13
Citation: 434 S.E.2d 455, 263 Ga. 412, 93 Fulton County D. Rep. 3300, 1993 Ga. LEXIS 627
Snippet: directors-and-officers liability insurance carrier, see OCGA § 14-2-858, SCI controverted that claim in an affidavit submitted