Tata Row may Trigger Insurance Claim

The sacking of Cyrus Mistry and its fallout might trigger a claim under the Directors & Officers (D&O) insurance cover purchased by Tata Sons. A D&O policy covers the top management of an organisation from legal actions initiated by employees, shareholders or authorities against the decisions taken by the top brass in the course of their duties. Besides damages, the policy covers the cost of legal defence of directors, even in their individual capacity, where the company is unable to defend them. Insurance industry insiders are worried that trading of allegations might lay the ground for legal action by investors or directors, triggering a claim.

Like many companies, Tata Sons too has a D&O cover, which is understood to have been for $50 million three years ago. However, in 2014 Tata Sons is learnt to have sought an increase in the cover, which is provided by Tata AIG General Insurance and arranged by Howden Insurance Brokers. However, the insurers declined to comment.

Apart from providing insurance to the directors of Tata Sons, the policy also acts as a cover for group companies. In response to a TOI query, a Tata Sons spokesperson said that the company purchases different kinds of covers according to its requirements but did not elaborate.

Insurers say that the most potent development in the Tata battle is the letter from ousted chairman Cyrus Mistry where he raised the issue of impairments and made a statement that Tata Motors was taking loss-making decisions on emotional grounds. "The risks of investor actions are very high in the US where the company is listed," said an insurance official. In case of proceedings in the US, the defence cost itself runs into millions of dollars and these have typically comprised a large chunk of D&O claims.

From now on, if a hospital does not spend 60% of the insurance funds it receives for improving its facilities in a year, then it will be transferred to an account opened by the director of health service and district medical officer. This would become a challenge fund which other hospitals can bid for by preparing a project proposal.