All too often the task of procuring and renewing D&O insurance at a portfolio company is assigned to the portfolio company’s CFO or Controller, who employs an insurance broker to find the best price for the amount of coverage deemed appropriate by the broker. When such insurance is procured and thereafter renewed, the CFO/Controller simply reports to the board the fact of the procurement/renewal and few questions about the terms of coverage are discussed at the board level. This can be a big mistake.

The High Court has held that a bank owed a duty of care to its customer when on notice that an agent acting for the customer was misusing his authority. In the case of Singularis Holdings Limited (in Official Liquidation) v Daiwa Capital Markets Europe Limited [2017] EWHC 257 (Ch), a bank was liable in negligence to its customer since it was on notice that its customer was at risk of being defrauded by its director but failed to stop payments made for the purpose of misappropriating funds of the company.

The Facts