In Steigrad v BFSL 2007 Ltd & Ors [2013] NZSC 156 (“Bridgecorp”) the New Zealand Supreme Court decided that when a directors and officers insurance policy which contained a single limit of liability covering both liability and defence costs claims the third party claims have priority over defence costs if the limit is insufficient to satisfy both claims.

The Supreme Court reversed the Court of Appeal decision (discussed here).

Directors should seek to have their defence costs insurance in a separate policy.