Abstract

Cover of Management Consultancy - Proof of Cover Generally - Exclusion of Director's Liability

Article

Cover of a Management Consultancy

The cover of Liability Insurance of a management consultancy may, depending on the evidence, extend to the provision of an officer or director to act as such to assist a client, and through this to liability to some other party who has a claim against that person arising from his acting on behalf of the client. That Directors and Officers insurance policies were available is not a valid reason for reading down the cover in such circumstances. If the policy’s definition of ‘Professional Services’ refers to the business of provision ‘by the Insured’ of the Professional Services stated in the Schedule, the business of ‘management consultancy’ is not to be understood in the abstract. The words ‘in the conduct of’ ought not to be given a narrow meaning. If it is part of the insured’s management consultancy business to provide services as a director, not separately from the management consultancy business, they form part of it: Blakeley, Ryan & Olde v CGU Insurance Ltd [2017] VSCA 378.

 

Directors as such usually have powers only in meeting, and have no power to conduct the management of the company. Unless the company’s constitution otherwise provides, they can exercise their powers only collectively at board meetings, but it is otherwise if there is a sole director or if the constitution authorises board resolutions by a circular resolution signed by them. As a board, they may resolve whether certain management activities should be pursued, which binds management: CGU Insurance Ltd v Blakeley (2016) 259 CLR 339.

 

If it also is inherent in such services that the insured might itself act as a de facto or shadow director, it too would occur ‘in the conduct of’ that business The expressions ‘de facto’ and ‘shadow’ director are derived from the definition of ‘director’ in s 9 of the Corporations Act. A person is a ‘de facto’ director if he is not validly appointed as a director but is nevertheless one within the meaning of the Corporations Act by acting in the position of a director. He is a ’shadow’ director if ‘the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes.’  Blakeley, Ryan & Olde v CGU Insurance Ltd [2017] VSCA 378.

 

 

Proof of Cover

Whether a particular part of the insured’s activities comes within the description of the covered activities must be proved by the insured, who may lead evidence  going to that issue. The insurer’s underwriting manual’s listing of activities of the insured type of business may support the inclusion of a particular aspect of the activity as one which is within the general description of the cover by its reference to that type of business: Blakeley, Ryan & Olde v CGU Insurance Ltd [2017] VSCA 378.

 

Exclusion of Director’s Liability

In an exclusion if an insured is either an incorporated body or a director or officer of an incorporated body arising from any act, error or omission of a director or officer of that incorporated body, ‘that incorporated body’ refers to the insured company and not another: Blakeley, Ryan & Olde v CGU Insurance Ltd [2017] VSCA 378.