The previous lesson showed that the part protecting personal assets is useful only where the company does not indemnify. It remains to say when that happens, and the answer is almost always the same: when the business is in difficulty. That is the moment this insurance stops being a comfort and becomes the only thing between a former director and the loss of its property, and it is also the moment it is most fragile.
The mechanism is simple to describe and unfolds in much the same order every time. The company enters insolvency proceedings. An officer is appointed to represent the creditors, and part of that work is to rebuild the assets. It then examines the management of recent years and looks for faults that contributed to the shortfall. Directors, former and current, find themselves pursued at a moment when the company that should have indemnified them has nothing left, when its cash is under court control, and when nobody has an interest in defending its past.
Three consequences follow and must be held together. The first is that part B becomes inoperative: the company can no longer advance, so there is nothing to reimburse, and everything shifts to part A. The second is that the claimant acts in the creditors' interest, which makes settlement harder than between two companies. The third is that the directors pursued have often been gone a long time, sometimes years, and discover the file through a writ.
One must then know what threatens the policy itself during that period, since it is the point manuals forget. A policy is a contract, and a contract lapses when nobody pays the premium. A company in difficulty often stops paying, or its administrator decides not to continue a contract that does not benefit the creditors. On a claims-made basis, cancellation closes the cover for any claim received afterwards, and claims against directors arrive precisely afterwards. A director can therefore end up without cover not because it acted badly, but because nobody had any reason left to pay its premium.
That explains the particular importance, in this line, of the extended reporting period and of what is called run-off cover. The first extends the receipt of claims after the contract ends, as in any claims-made policy. The second, met under the name of end-of-contract cover, provides a long period triggered precisely by insolvency proceedings or by non-renewal, and it exists because that is the case where an ordinary extended reporting period is shortest at the moment it is most needed.
A question that arises forcefully in this context must be added: to whom does the indemnity belong. Where the company is insured and has failed, its creditors may argue that the benefit of the policy forms part of the estate to be distributed. Where it is the directors who are insured under part A, the indemnity is owed to them personally and escapes that argument. The distinction looks theoretical and it decides who receives the money, which is the only thing the parties look at once liability is established.
The useful step belongs to the director and is taken before the difficulty, not during. Check that the policy provides cover triggered by insolvency proceedings and not merely an ordinary extended reporting period. Check that part A does not depend entirely on the company's decisions, notably for payment of the premium and for notification of circumstances. And know, on leaving office, that exposure does not stop at departure: it lasts as long as acts of management can be held against you, and that is longer than most directors' memory.
A distribution company is placed into liquidation on March 12, 2026. Its directors' and officers' policy, claims-made, expired on December 31, 2025 and was not renewed: the finance director, who left in October 2025, had not been replaced and nobody handled the renewal. The contract provided a five-year extended reporting period in the event of non-renewal. In January 2028 the liquidator sues the former chairman and the former managing director to make good the asset shortfall, over procurement decisions taken between 2022 and 2024, claiming 3.1 million euros. The former chairman, retired, asks whether his house is at stake. What should he be told?
The answer rests on three successive checks, and the first decides everything else. The five-year extended reporting period runs from the non-renewal of December 31, 2025, therefore to the end of 2030: the January 2028 writ arrives within that period, and that is the file's good news, without which there would be nothing to say. The trigger written into the contract must still be checked, since an extended period provided "in the event of non-renewal" does not always open where a contract simply lapses for want of being dealt with, and the distinction between a decided non-renewal and a forgotten contract is arguable. The second check bears on the retroactive date: the decisions complained of date from 2022 to 2024, and if the contract's retroactive date is earlier they fall inside; if it had been set later they would be outside and the extended period would be useless, since it extends the receipt of claims without widening the faults covered. The third bears on which part of the contract will respond, and this is where the lesson applies: the company is in liquidation, it can advance nothing, part B is dead, and everything rests on part A, which pays directly into the director's hands. The chairman's assets are therefore protected up to whatever the limit leaves, and what it leaves must be checked, since the former managing director draws on the same source. Two things to tell the client, and the second matters more than the first. The file turns not on fault but on three dates: the trigger of the extended period, the retroactive date, and the arrival of the claim. And this story's real defect is a renewal nobody handled because a finance director had left: the directors' cover hung on a vacant post, and that is the kind of dependency an outgoing director must check personally, since nobody in a company in difficulty has any reason to do it for them.
- 01The part protecting personal assets is truly useful only where the company can no longer indemnify, that is, when it is in difficulty.
- 02In insolvency part B dies, everything shifts to part A, and the claimant acts for the creditors, which makes settlement harder.
- 03A policy lapses when nobody pays the premium, and claims against directors arrive precisely afterwards.
- 04Cover triggered by insolvency exists because an ordinary extended reporting period is shortest at the moment it is most needed.
- 05Insured under part A, the director receives the indemnity personally, and it escapes the argument over the estate to be shared among creditors.