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Directors' and Officers' Liability Insurance

Page 125 6 DIRECTORS’ AND OFFICERS’ LIABILITY TO THIRD PARTIES I. INTRODUCTION 6.01 Professional indemnity (“PI”) insurance developed to provide indemnity to the insured in respect of damages awarded against him/her as a result of their failure to exercise reasonable care in the performance of their duties owed to a third party. PI policies provide coverage in respect of actions for breach of contract and in tort, although in practice the two causes of action stand or fall together. In each case the claimant has to show a failure by the professional to exercise reasonable care in the performance of the tasks entrusted to him. 1 What might be described as “pure” contract claims, that is, claims in respect of contractual duties additional to the ordinary professional obligation to carry out the promised service, are generally excluded: such claims are covered only if the corresponding duty exists in tort. 2 In recent years the test for tortious liability has been developed and reformulated and the notion that liability will be recognised only if there has been a “voluntary assumption of responsibility” 3 has come to the fore. 4

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