CPCU 552 Test #2 (Ch. 7-8) Exam Questions and Answers 100% Solved
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Course
CPCU 552
Institution
CPCU 552
CPCU 552 Test #2 (Ch. 7-8) Exam
Questions and Answers 100% Solved
Describe the major functions of a corporation's board of directors. - •
establish corporate policy
• make major business and financial decisions
• appoint executive officers to manage daily operations
Describe the 4 fiduc...
• insiders profitably sold their personal holding in stock while inflated
Discuss why corporations might settle claims against their directors and
officers even if they believe they have defenses to the claims. - ✔✔defense
costs and the amount of time required to prepare an adequate defense can
be devastating
Discuss how settlement of claims against a corporation's directors and
officers can present problems for indemnification of the directors and
officers. - ✔✔• indemnification under common law required successful
defense against suit
• when it is settled, it is terminated with no determination of wrongdoing
• not clear whether the directors and officers are entitled to indemnification
, Discuss the reasons that risk control should be a central part of the
management of directors and officers (D&O) loss exposures. - ✔✔• claims
against D&Os can create significant defense settlement costs
• D&O liability insurance cannot restore a corporation's reputation
• loss of reputation can damage customer relationships, hinder access to
capital markets, and make it difficult to attract highly qualified executives
What is covered by Coverage A of a D&O liability policy? - ✔✔• insures
individual directors and officers
• indemnifies corporation's D&Os for covered claims only when it is NOT
required by law, is NOT permitted by law, or is financially prohibited b/c
lacks of funds or bankruptcy
• limited to losses the corporation does not or cannot provide
indemnification to the D&Os
What is covered by Coverage B of a D&O liability policy? - ✔✔• insures
corporation for amounts it is lawfully permitted or required to pay to defend
or settle claims against D&Os
• if a director is held liable for a loss caused by a covered wrongful act and
the corporation is lawfully able to indemnify the director, the loss will be
paid under Coverage B
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