1. What is the DOLI policy?
The Directors’ and Officers’ Liability Insurance (DOLI) policy is an insurance cover designed to protect the government-owned and -controlled corporation (GOCC), government financial institution (GFI), agency, or commission – and its directors/trustees and officers – against the cost of litigation and liability in the course of performing the official acts of its governing Board and Management.
2. Why do GOCC directors/trustees and officers need the DOLI?
GOCC directors/trustees and officers can be held personally liable for the actions they perform in relation to their duties in the corporation. Thus, they have to be protected from costly and lengthy lawsuits that could otherwise drain their personal resources.
3. Who are covered by the DOLI policy?
Directors/Trustees. These include ex officio and appointive directors [GCG Memorandum Circular (MC) No. 2012-10 dated 28 August 2012; taken from Section 1 (Definition of Terms) of the Code of Corporate Governance for GOCCs, Republic Act 10149.]:
- Appointive directors – (1) All members of the Board of Directors and Trustees of chartered GOCCs (those created and vested with corporate functions by special laws) who are not ex officio members; (2) Members of the Board of Directors/Trustees of nonchartered GOCCs (those organized under the Corporation Code of the Philippines), whom the State nominates or is entitled to nominate, to the extent of its percentage shareholdings in the GOCC; and (3) Members of the Board of Directors/Trustees of Affiliates (corporations owning 50% or less of outstanding capital stock either directly or indirectly), whom the GOCC nominates or is entitled to nominate to the extent of its percentage shareholdings in such affiliate.
- Ex officio Board members – any individual who sits or acts as a member of the Board of Directors/Trustees by virtue of one’s title to another office, without further appointment.
- Alternates of ex officio Board members – representatives of ex officio members whose acts are considered acts of their principals.
Officers. These include both Board and executive officers.
- Board Officers refer to the chairman, vice chairman, corporate secretary, or other officers who are primarily tasked to serve the Board or pursue its immediate functions.
- Executive Officers refer to the chief executive officer, or whoever is the highest ranking officer in the GOCC, and such other corporate officers under its charter or bylaws, and other senior officers, such as the vice president, chief financial officer, chief investment officer, and general manager, whose positions are equivalent to the rank of director, assistant secretary, or undersecretary in the national government sector.
4. Does the DOLI cover retired or separated officers?
Yes. The insured, in the context of the DOLI, means any natural person who was, is, or shall become a director or officer of an agency.
It is required, however, that the acts complained of against the retired or separated director/trustee or officer must have been committed not earlier than the continuity or retroactive date indicated in the Policy Schedule. This date confirms that the policyholder has maintained an uninterrupted insurance cover.
5. What is the basis of GOCCs to provide the DOLI?
The authority to provide the DOLI for members of GOCCs’ governing Boards and officers is stipulated under Section 32 of the Code of Corporate Governance, which states that “it is equitable that when the GOCC itself and/or the members of the Board and Management are sued before tribunals on matters that are within the official functions and capacity and on matters where business judgment has been exercised in good faith, that there be proper recovery of the costs and litigation and the judgment liability imposed.”
6. What are the terms and conditions governing the authority of GOCCs to obtain the DOLI?
- Premiums on DOLI coverage should form part of the annual corporate operating budget of the GOCC, or of its supplementary budget, if needed;
- Procurement of DOLI coverage should be consistent with applicable procurement laws, rules and regulations, RA 9184 (Government Procurement Reform Act), and Administrative Order 33 (Prescribing Guidelines for the Insurance of All Properties, Contracts, Rights of Action and Other Insurance Risks of the Government); and
- A GOCC may provide for ‘self-insurance’ by creating a Directors’ and Officers’ Liability Fund based on actuarial and feasibility studies commissioned by the Board.
7. What are the acts covered by the DOLI?
Act/s covered means any act or omission committed in good faith by the insured in their respective capacities as a director/trustees or officer of the GOCC, or any matter claimed against them solely because of their status as a director or officer, which gives rise to a cause of action against them and the GOCC in any court, tribunal, or administrative agency exercising quasijudicial functions.
8. What are considered valid and reimbursable expenses under the DOLI?
- DOLI with GOCC as beneficiary. Reimbursement from the litigation costs incurred and damages suffered due to or arising from the breach of a director/trustee/officer of his fiduciary duties.
Under Section 19 of RA 10149, the members of the Boards of Directors/Trustees and the officers of GOCCs are designated as “fiduciaries of the State with the legal obligation and duty to always act in the best interest of the GOCC, with utmost good faith in all its dealings with the property and monies of the GOCC (GCG MC No. 2012-10 dated 28 August 2012).”
- DOLI with Directors/Trustees and Officers as beneficiaries. Reimbursement from the litigation costs incurred and damages suffered due to acts or omissions committed in good faith by the insured in their respective capacities as directors/trustees or officers of the GOCC, or any complaint filed against them solely because of their positions, giving rise to a lawsuit or regulatory action.
In particular, these claims may arise from:
- Suits or proceedings brought by employees who have been the proper subject of disciplinary actions;
- Unwarranted or nonmeritorious complaints filed with the Ombudsman or other disciplinary agencies for the purpose merely of taking defensive measures to compel settlement; and
- Costly litigations brought about by disgruntled clients or desperate borrowers seeking to evade foreclosure or repossession of their mortgaged assets.
9. What are considered invalid expenses under the DOLI?
These are payments made for any claim against the insured:
- Where the court, tribunal, or administrative agency finds that the GOCC, acting through its Board of Directors or Management, has violated its charter or caused unreasonable damage to its identified stakeholders.
- Where the DOLI is used as ‘indemnity benefit’ for directors/trustees and officers of a GOCC, as they are public officials for whom government funds cannot be expended by way of insurance premium payment for their personal benefit.
- Where liabilities arise from the director’s/trustee’s or officer’s fraud, breach of fiduciary duties, or unethical conduct.
10. Are criminal cases that reach the Sandiganbayan covered by the DOLI?
Yes. If the insured director/trustee or officer is found not liable for the allegation of fraud or breach of fiduciary duties, the GSIS shall reimburse the director/trustee or officer the amount spent related to the case.
However, if found guilty by the Sandiganbayan, the advances made to the insured director/trustee or officer shall be converted to a personal loan, which must be paid as indicated in the Loan and Trust Agreement.
11. Is a countersuit filed by the insured against the complainant covered by the DOLI?
No. A claim, as defined under the DOLI policy, specifically refers to any suit or proceeding brought by any person or organization against the insured. Thus, countersuits as defensive moves are not covered by the DOLI.
12. Does the DOLI policy cover cases where the insured is acquitted?
Yes. Per GCG MC 2012-10, a judgment acquitting the director/trustee or officer validated the expenses paid or reimbursed as legitimate company expense.
13. Is arbitration proceeding applicable under the DOLI?
Yes, if the trial court has referred the case for arbitration prior to full trial in court.
14. Will an application for DOLI coverage be denied due to frequent DOLI claims?
No. However, losses may affect the computation of the premiums. For example, the deductible/participation of the GOCC for each and every claim on the renewal will be adjusted upward as a result of the frequency of claims. Unless there are remedial measures adopted by the agency to mitigate those potential claims, the System will increase the deductible, and, if necessary, premiums as well.
15. Should there be a separate coverage for affiliates?
No, if the duties of the director/trustee or officer of the insured GOCC in the affiliate company are related to his/her duties in the principal GOCC.
Yes, if the duties of the director/trustee or officer in the affiliate are entirely unrelated to his/her duties in the insured GOCC.
16. How does a GOCC secure DOLI coverage?
Procurement of DOLI coverage is subject to bidding pursuant to all applicable procurement laws, rules and regulations, RA 9184, and AO 33.
17. How long is the procurement process for DOLI reinsurance?
Procurement of reinsurance support for DOLI ranges from 28 days (the earliest possible time) to 124 calendar days (latest allowable time), under RA 9184.
18. Can an agency secure DOLI coverage from private insurance companies?
Yes. Under Section 6 of the GCG MC 2012-10, the GOCC or GFI may obtain DOLI coverage from a provider accredited by the Insurance Commission who either offers terms better than what the GSIS can provide or which the GSIS is unwilling to match.
Further, the non-GSIS DOLI coverage should be pursuant to Section 5 of RA 656 (Property Insurance Law), which, among others, requires GSIS’s refusal to accept insurance coverage and obtaining a letter from the GSIS declining the invitation to participate as insurance provider.
19. How does the GSIS determine the premium rate for the DOLI?
The GSIS considers the DOLI as a high-risk insurance. As such, the GSIS Insurance Group evaluates all the required documents that are submitted, the nature of business of the agency, and the cases filed against the agency, if any, to determine the proper premium rate.
As to the limit of liability, the GSIS will allow the limit proposed by the agency. However, the amount should not exceed the net financial contracting capacity, which is defined as current assets minus current liabilities.
20. What is the limit of GSIS liability per director/trustee and officer?
It is determined based on the assessment or evaluation of documents submitted by the agency pertaining to the risks taken by the GOCC.
21. What is the limit for an attorney’s fee?
It would depend on the assessment of the Underwriting Department of the GSIS.
22. What is the total sum or maximum insurance for a GOCC?
It varies. It would depend on the assessment of the Underwriting Department of the GSIS.
23. If the entire Board of Trustees is charged in court by a complainant with one type of suit, will the limit for lawyer’s fees be applied to each individual board member or to the entire Board as a corporate group?
The limit for lawyer’s fees applies to any one claim arising out of a single act covered, whether it is individual or corporate reimbursement. Thus, even if each Board member decides to get his or her own legal counsel, the limit will still be the aggregate limit because there is only one case filed.
24. If the insured is charged with a civil case, and parties agreed to a settlement, can the claim be filed with the GSIS? What if the case is criminal?
Yes, a claim may be filed since settlement is allowed in civil cases but not in criminal cases.
25. How long is the processing of a DOLI claim?
Upon submission of complete documents, reimbursement of initial defense costs for a particular claim per insured takes 15 working days on the average to process.