{"id":1832,"date":"2022-05-19T08:43:40","date_gmt":"2022-05-19T13:43:40","guid":{"rendered":"https:\/\/www.bbrown.com\/?post_type=insight&p=1832"},"modified":"2022-09-09T09:29:31","modified_gmt":"2022-09-09T14:29:31","slug":"held-captive-the-dgcl-145-amended","status":"publish","type":"insight","link":"https:\/\/www.bbrown.com\/us\/insight\/held-captive-the-dgcl-145-amended\/","title":{"rendered":"Held Captive: The DGCL \u00a7 145 Amended"},"content":{"rendered":"

[vc_row row_style=”page-hero” full_width=”stretch_row_content”][vc_column]\n\t

\n\n\t\t
\n\t\t\t
<\/div>\n\t\t\t\t\t\t\t
<\/div>\n\t\t\t\t\t<\/div>\n\n\t\t
\n\t\t\t
\n\t\t\t\t
\n\n\t\t\t\t\t\n
\n

White Paper<\/p>\n

\n Held Captive: The DGCL \u00a7 145 Amended\n <\/h1>\n\t\n <\/div>\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\n\t<\/div>\n\n\t\n[\/vc_column][\/vc_row][vc_row][vc_column width=”2\/3″]\n
\n \n

\n Held Captive: The DGCL \u00a7 145 Amended\n <\/h1>\n\t\n <\/div>[vc_column_text]On February 7, 2022, Delaware Governor John Carney signed Senate Bill No. 203 (\u201cthe Bill\u201d), which provided pertinent amendments to Section 145 (\u201c\u00a7 145\u201d) of the Delaware General Corporation Law (\u201cDGCL\u201d). The amendments allow Delaware corporations to purchase and maintain executive liability insurance, encompassing directors\u2019 and officers\u2019 and fiduciary liability, via captive insurance companies, regardless of their domicile. \u00a7 145 gives Delaware corporations the right to utilize a captive insurance company to provide coverage for both indemnifiable and non-indemnifiable losses.<\/p>\n

What Is Captive Insurance?<\/h3>\n

Defined by the synopsis supplementing the Bill, a captive insurance company is \u201can insurer, directly or indirectly owned, controlled and funded by the corporation,\u201d which may, but does not have to be, licensed within the jurisdiction of Delaware. The Bill explains that choosing to establish or maintain a captive insurer does not alone subject the corporation to the Delaware Insurance Code. A captive insurer, a subsidiary funded by the corporation, may provide liability coverage for current and former directors, officers, employees and other indemnifiable individuals.<\/p>\n

Senate Bill No. 203 and DGCL \u00a7 145<\/h3>\n

DGCL \u00a7 145 as it was:<\/strong><\/p>\n

Preceding the passing of the amendments to \u00a7 145, directors and officers could not be indemnified by Delaware corporations for derivative suits pertaining to breaches of fiduciary duties or bankruptcy-related litigation. Many corporations sought to purchase Side A D&O liability insurance to ensure coverage for otherwise non-indemnifiable exposures in response to this dilemma.<\/p>\n

DGCL \u00a7 145 as amended:<\/strong><\/p>\n

As amended, DGCL \u00a7 145 provides that, like third-party commercial insurance, a captive insurance policy may indemnify indemnifiable individuals \u201cwhether or not the corporation would have the power to indemnify them under \u00a7 145.\u201d In addition, DGCL \u00a7 145(g) provides specific authorization for Delaware corporations to utilize a captive for protection from fines, judgments and amounts paid to settle claims brought either by or in the right of the corporation.<\/p>\n

Limitations to DGCL \u00a7 145 as amended:<\/strong><\/p>\n

The Bill includes a series of limitations imposed upon a Delaware corporation\u2019s utilization of a captive insurance policy. The exclusionary limitations provision within \u00a7 145(g)(1) provides that the captive, should it be used, may not allocate payments in connection with losses related to the following:<\/p>\n