Flint Transfield Services Limited

Directors’ & Officers’ Liability Insurance

Catherine Richmond, LLB, CRM Directors’ and Officers’ Liability Aon Canada

presented by

Aon Reed Stenhouse Inc.

May 2014 July 2009

D&O Litigation Trends

Canadian Securities Filings by Sector 2013 Source: NERA Economic Consulting

US Filings against Canadian Companies 2013 Source: NERA Economic Consulting Source: Trends in Canadian Securities Class Actions: 2013 Update, NERA Economic Consulting

Overview of D&O Insurance Program BROAD FORM (DIC)* EXCESS A-SIDE COVERAGE A-SIDE COVERAGE EXECUTIVES’ PERSONAL ASSETS PROTECTION Broad Form A-Side DIC* Coverage



Drops down to primary if underlying insurance:



wrongfully refuses to indemnify

  

is financially unable to indemnify is rescinded is subject to bankruptcy/financial impairment



Is non-rescindable for any reason

*DIC = Difference In Conditions Annual, Aggregate Limit

B-SIDE COVERAGE CORPORATE BALANCE SHEET PROTECTION C-SIDE COVERAGE CORPORATE ENTITY PROTECTION (securities claims only)

NO DEDUCTIBLE DEDUCTIBLE

D&O Liability: Hot Topics

1. Purchasing decision changing – Directors and Officers engaged 2. Program structure – Who should be insured?

– Adequacy of Limits – Side A—Difference in Conditions (“DIC”) 3. International Placements 4. M&A 5. Choice of Insurer 6. Indemnification

7. Northstar

Decision – Environmental Remediation

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Northstar Aerospace Case (Baker v. The Ministry of The Environment – Ontario)

Northstar:

Background

• 1981 – 2009 : Parts manufacturing facility operated in Cambridge, ON • 2004: Pollution remediation starts • 2012: Northstar Aerospace goes bankrupt • 2012: MOE takes over remediation efforts and files regulatory action against 12 former D&O’s • 2013: D&O’s settle with MOE for $4.75 million

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Northstar and

D&O

Insurance

• Pollution Matters: – D&O meant to cover defense costs and financial loss – Will not cover clean-up costs, property damage – Excess to other insurance policies (EIL, GL) – Coverage Issues: › Remove pollution exclusion › Side A Difference in Conditions › Aon is working on wording to address remediation liability to provide express protection to directors and officers

Northstar and

EIL

Insurance

• Environmental Impairment Liability (EIL) – Covers pollution conditions that commence after inception date – Site-specific – Covers remediation expenses and bodily injury/property damage – Coverage Issues › Survives bankruptcy of the insured?

› Directors and officers named?

› Challenges insuring known problems › Specialized wordings

Thank You

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