Bharti Walmart’s insurance cover against litigations and scandals faced by its directors and senior officers may be triggered as the probe into potential violations of America’s anti-bribery laws by the Indian unit Walmart gathers pace.
The company has a directors & officers’ liability cover (or D&O policy) worth $5 million from HDFC Ergo General Insurance. The insurance policy partly protects the company and its directors and officers for wrongful actions that cause financial harm and result in a lawsuit. If there is a litigation filed against the executive for any decision taken by the person, the cover ensures that the concerned insurer bears the legal expenses.
“If the directors are accused of any misconduct, then the policy will get triggered,” said Mukesh Kumar, head of Strategic Planning, HDFC ERGO General Insurance at HDFC Ergo. “Since the company has taken a pre-emptive step to suspend some people, the chances of a claim are higher now. But there is no certainty unless a legal suit is filed against them,” he said.
Recently, Bharti Walmart suspended its chief financial officer (CFO) and the entire legal team as part of a high-profile global investigation into potential violations of America’s antibribery laws.
Since early 2011, the US giant has faced allegations of potential violations in a number of foreign markets like Brazil, China, Mexico and India. Walmart has no retail stores in India, but its joint venture with Bharti Enterprises runs 18 cash-and-carry outlets in the country. “Any kind of litigation could trigger the D&O cover,” said Dipika Mathur of HDFC Ergo. “If the directors are liable, the coverage is triggered.”
Insurers said that investigations under the US and US anti-bribery laws have triggered many D&O covers worldwide. There is a growing market for the product in India as well.
One of the largest claims was Tata AIG General Insurance’s payment of Rs 60 crore following the Satyam fiasco. Post Satyam fiasco, there has been a surge in demand for products covering directors and officers liability from Indian corporates, including small and medium companies.
