The Bottom Line
- Renewed Duty of Disclosure: A substantial increase in your insurance coverage isn’t a simple update; it can be treated like a new policy, triggering a full duty to disclose all relevant risks and claims.
- “No-Claim” Declarations are Binding: Signing a declaration that you’re unaware of potential claims while knowing about active lawsuits or investigations can lead an insurer to void any coverage increase granted on that basis.
- Directors’ Personal Risk: Failure to be transparent can leave directors and officers personally exposed, as the enhanced insurance limit they believed they had may not exist when a major claim arrives.
The Details
This case involved a director of a Dutch company, [bedrijf], which held a Directors & Officers (D&O) liability insurance policy with Chubb, capped at €2.5 million. In 2013, the company sought to quadruple its coverage to €10 million. As a condition, Chubb required the director to sign a “no-claim declaration,” affirming he was unaware of any claims or circumstances that could lead to a claim. The director signed, and Chubb approved the increase. However, at that very moment, the company and the director were embroiled in a civil lawsuit over fraudulent invoices and were the subject of a criminal bribery investigation involving the World Bank.
The Amsterdam District Court sided with the insurer, Chubb, in a ruling that carries significant weight for corporate governance. The court determined that a substantial policy amendment—like a 300% increase in coverage—is legally analogous to entering into a new insurance agreement. This triggers the full statutory duty of disclosure under Dutch law. The director should have known that an active civil lawsuit and a major criminal investigation were highly material facts that would influence any insurer’s decision to take on an additional €7.5 million in risk. The failure to mention these critical issues constituted a breach of this duty.
The consequences for the director were severe. The court found it credible that had Chubb been aware of the true state of affairs, no reasonable insurer would have approved the coverage increase. Because the increase was granted based on false information, Chubb was entitled to void that specific part of the agreement. The company later went bankrupt, and its trustee is now holding the director personally liable for millions. Instead of having a €10 million safety net, the director is left with only the original €2.5 million policy limit, dramatically increasing his personal financial exposure.
SOURCE: Rechtbank Amsterdam
