Tata AIG, an insurance venture of the Tata Group, has rejected Satyam’s claims towards legal costs. Once the fourth largest IT exporter, Satyam had taken the Directors & Officers Liability policy (D&O Policy) to protect its executives against legal costs in defending suits brought against them for wrongful acts and any awards, including out of court settlements.
Under D&O Policy, the company also gets cover if it is exposed to a ‘Securities Claim’. Besides Tata AIG, The New India Assurance and ICICI Lombard also offer such kind of policy.
In initial stage, Tata AIG rejected Satyam’s claims on grounds of absence of additional documentation and information. But later, Satyam sent the claim notifications regarding receipt of notices from several regulatory authorities and the Class Actions. Besides this, it also attached the enclosed copies of letters from directors and officers on likelihood of potential claims. However, Tata AIG has sought additional documentation and information. Satyam expressed its disagreement with positions taken by Tata AIG, but agreed to furnish additional details.
In October- December 2008, Satyam bore an insurance cost of Rs 3 crore, whereas in January-February it was Rs 1 crore.