Company directors face “a myriad of different rules in different states” regarding directors’ and officers’ (D&O) insurance, according to Catlin Australia Senior Underwriter for Financial and Professional Risks Michael Herron.

“As I understand it... there are 700 different pieces of law in Australia imposing personal liability on company directors, 180 in NSW alone,” he told the Australian Professional Indemnity Group annual conference in Sydney last week.

The laws can range from work health and safety rules to environmental disclosure by listed companies and food safety regulations. They can impose strict liability on individuals and companies, and requirements for defence costs and other issues.

Legal costs and total losses can be high in D&O cases, Mr Herron says.

“In the case of Bridgecorp in 2007, it had a $20 million D&O policy and more than $300 million of losses. There were literally thousands of investors and others lining up to sue directors and the company.”

Other big class-action settlements include $200 million for Centro last year and more than $100 million for Aristocrat in 2008.

“You can also add NAB, Multiplex, GIO, GPT and a bunch of others. In all these cases, you have examples of very large losses and pretty finite D&O policies.”

The best D&O cover ensures the interests of directors and companies are aligned, Mr Herron says.

In a GIO securities claim a decade ago, all directors were sued over a merger with AMP and had to fight individual defences.

“It costs the plaintiff, the lawyers and the litigation funders a lot more to bring a claim where they are suing the individual, rather than just the company. But it also proves tricky for the directors.”

Successful D&O products include cover for events such as initial public offerings, Mr Herron says.

“This sells particularly well to companies that want to wrap up the extra expense of having a public offering and the investment banking fees in one area.”

Another form of D&O cover offers top-up policy options. “It’s generally another tool that brokers can use to manage what their clients need.”