The treatment of defence costs and their impact on the limit of
indemnity differs from jurisdiction to jurisdiction
With the increasing globalisation of companies comes a
corresponding increase in the number of jurisdictions in which
directors of those companies may face claims. It is therefore
important for directors to know what their directors' and
officers' (D&O) liability policies cover, particularly as
regards defence costs, as many jurisdictions treat defence costs
and their impact on the limit of indemnity differently.
England and Wales: The courts of England and
Wales have generally taken a relatively subjective approach,
relying on the precise wording of the policy to determine how
defence costs are treated. For example, in Wyeth v Cigna
(2001), it was held the policy must expressly cover defence costs
and the liability only arose once coverage for the underlying claim
had been established. Conversely, in Poole Harbour Yacht
Club (1997), the insured was
