Directors and officers insurance: lessons arising from ASIC v Bekier

The Federal Court’s 500-page judgment in Australian Securities and Investments Commission v Bekier [2026] FCA 196 (ASIC v Star directors and officers) has attracted considerable attention for its corporate governance lessons and insights for directors and senior executives facing regulatory enforcement action and related shareholder claims. We take the road less travelled by examining the case through the D&O insurance lens, using its facts to illustrate the background response of indemnities and insurance.

The Court in ASIC v Star directors and officers did not consider the existence or operation of Star’s insurance arrangements, and the authors do not have any knowledge of those arrangements. This article uses ASIC v Star directors and officers as a ‘hypothetical’ to make general observations about the potential insurance implications of the judgment and discusses insurance cover on the basis of current market-standard terms.

Background to the proceedings 

The Star Entertainment Group Limited (Star) is an ASX‑listed company operating gaming and hospitality assets across Australia, including The Star Casino in Sydney. In 2022, ASIC brought civil penalty proceedings against 11 current or former directors and officers of Star, alleging breaches of the statutory duty of care and diligence under section 180(1) of the Corporations Act 2001 (Cth) (Corporations Act). The defendants included Star’s chief executive officer, general counsel, chief financial officer and chief casino officer, as well as the chair and non‑executive directors.

The proceedings concerned Star’s dealings with high‑risk junket operators and misleading communications with its principal banker in relation to the use of China UnionPay cards for gambling transactions. ASIC alleged that the defendants failed to exercise reasonable care and diligence in responding to the resulting legal and reputational risks.

The Court found that Star’s former CEO, Mr Bekier, and its general counsel and company secretary, Ms Martin, had contravened section 180(1). Claims against the remaining defendants were dismissed. Two other executives, the former chief casino officer, Mr Hawkins, and the former chief financial officer, Mr Theodore, had settled the proceedings in February 2025, each admitting a contravention.

Coverage under D&O and management liability insurance

D&O and management liability insurance policies generally cover individual directors’ and officers’ defence costs and any personal liability for compensation or damages arising from regulatory enforcement action of the kind brought in the Star proceedings. Coverage is not limited to directors and typically extends to C-suite members and other senior executives, including general counsels and company secretaries.

In ASIC v Star directors and officers, Ms Martin was found liable in her capacity as an officer of Star by reason of her dual legal and company secretary roles. Where a general counsel carries officer‑level responsibilities, D&O insurance will ordinarily cover defence costs and liability arising from third-party claims associated with the discharge of those duties.

Most D&O insurance policies comprise the following limbs of cover:

• Side A:  Cover for individual directors and officers for defence costs and legal liability for compensation or damages.
   
• Side B:  Reimbursement cover for the company, to the extent that the company has itself indemnified a director or officer for defence costs and legal liability for compensation or damages (under a deed of indemnity, provision under the company constitution or otherwise).
   
• Side C:  Cover for the company for securities claims made against the company (not against the directors or officers personally).

When considering the potential background insurance consequences in a case such as ASIC v Star directors and officers, a number of issues arise, including:

• whether the directors or officers have the benefit of a deed of access and indemnity;
   
• whether there is any prohibition or exclusion on indemnity either from the company under such deed or by an insurer under a D&O (or similar) policy; and
   
• how the structure of the D&O program (including Side A, Side B and Side C cover) may affect the policy response.

Deeds of indemnity

Directors and senior executives commonly have the protection of a deed of access and indemnity, which enables them to seek indemnification from the company itself, rather than making a direct claim under the D&O insurance policy. In some cases, an indemnity is available through the company’s constitution or under the employment or engagement terms for an individual director or officer. To the extent that a company indemnifies directors or officers, it may then in turn claim reimbursement under Side B of the D&O policy.

In ASIC v Star directors and officers, the non‑executive directors, although ultimately successful, incurred substantial defence costs. Companies will commonly agree to indemnify defence costs on a pay‑as‑you‑go basis, without requiring an adverse finding.

For those executives found legally liable, any advancement of defence costs by Star pursuant to a deed or similar arrangement may be affected by section 199A of the Corporations Act which retrospectively prohibits indemnification for defence costs in certain circumstances. 

Section 199A and the limits of corporate indemnification

There are statutory restrictions on when a company may indemnify its directors and officers pursuant to a deed or otherwise.

Section 199A of the Corporations Act prohibits a company from indemnifying a director or officer against a legal liability owed to the company or a pecuniary penalty imposed under the Corporations Act. Where a court imposes a civil penalty for a contravention of section 180(1), corporate indemnification is unavailable as a matter of law, regardless of the existence or terms of any deed of indemnity.

As corporate indemnification is prohibited for any civil penalties imposed on Mr Bekier or Ms Martin, any such exposure could only be considered for cover under Side A of a D&O policy.

The penalty phase of ASIC v Star directors and officers has not yet commenced so the penalties that will ultimately be imposed upon Mr Bekier and Ms Martin is not clear. Side A of a D&O policy may cover such penalties, if its terms permit indemnification. Some insurers still offer cover for civil penalties imposed on individuals insured despite the obvious policy argument that penalties are intended to be punitive in nature and insuring them undermines this. 

Whether defence costs can be indemnified by the company under a deed or similar is more nuanced. Deeds of indemnity commonly permit a company to advance defence costs in civil penalty proceedings ‘to the extent permitted by law’. Section 199A(3) prohibits indemnification in favour of the director in several circumstances including where ASIC brings civil penalty proceedings against a director and the director is found liable for conduct for which indemnification is prohibited under section 199A(2). 

The prohibition is only triggered at the point in time where an individual director or officer is found to be legally liable by a court (or makes an admission of legal liability in the context of a settlement). Defence costs may therefore be advanced by the company in favour of a director or executive officer while proceedings are ongoing and, following a finding or admission of liability, the company may need to seek reimbursement of those costs if the prohibition is enlivened. Advancement of defence costs is also contemplated by section 212 of the Corporations Act but is, again, subject to the company’s right of repayment if liability is ultimately established.

In long-running proceedings such as ASIC v Star directors and officers, the entitlement to advancement of defence costs has practical significance. While proceedings are ongoing and before liability is established, defence costs may be funded by the company. However, once liability crystallises and a civil penalty is imposed, the statutory prohibition in section 199A operates retrospectively to prohibit the company from bearing these costs.

For Mr Bekier and Ms Martin, a pecuniary penalty has (or soon will be) imposed under the Corporations Act and so to the extent that they were indemnified for their legal costs through a deed of indemnity or similar with Star, those fees will now need to be reimbursed due to the application of section 199A. 

For the non-executive directors, the prohibition under section 199A has not been triggered and so, no repayment of costs advanced is required.

Section 199B and the conduct exclusion

In the absence of a corporate indemnification for defence costs due to the prohibition under section 199A, a director or officer may turn to Side A of the D&O policy to seek reimbursement for those costs.

A further hurdle is that the D&O policy will not cover the individual director or officer if the prohibition in section 199B of the Corporations Act is triggered. That is, the insurance cannot indemnify the director where there is liability arising from conduct involving a wilful breach of duty in relation to the company or a contravention of section 182 or 183 of the Corporations Act.

In the ASIC v Star directors and officers scenario, the D&O policy could have covered these costs because the allegations against the defendants were founded on a breach of section 180(1) and a failure to exercise reasonable care and diligence. The further prohibition under section 199B was therefore not engaged.

Policy conduct exclusions

In addition to section 199B, most D&O policies contain a conduct exclusion which removes cover under the insurance contract for liability arising out of any claim based upon, arising from, or in consequence of, any deliberately fraudulent act, criminal act or wilful violation of law by an individual insured, if established by a final, non‑appealable adjudication. The conduct exclusion is intended to work in tandem with the Corporations Act prohibitions.

Given the allegations made against the defendants in ASIC v Star directors and officers and the Court’s factual findings, any conduct exclusion in a D&O policy in the background would not likely have been triggered. Of course, a final conclusion on that point would depend on the precise language of the D&O policy (i.e. the insurance contract). 

Even in circumstances where a conduct exclusion is triggered because of the conduct of one individual director or officer, other co-defendants are not ordinarily imputed with such conduct. Most D&O policies include severability clauses which mean the conduct or knowledge of one insured person is not attributed to others. This preserves coverage for those parties who are sometimes referred to as innocent co-insureds.

Broader insurance ramifications 

Whilst the case is an interesting case study for analysing cover under D&O insurance policies, it may also prompt policyholders to revisit their D&O program structure.

In addition to the ASIC action, Star was also responding to shareholder class actions which hypothetically would engage Side C of the D&O policy. The shareholder class actions arise from the same underlying factual matrix as the ASIC enforcement proceedings. The D&O policy may therefore be engaged on two fronts: Side A and/or B claim to defend the individual insured parties and Side C claim to defend the company in the class actions. Claim payments by an insurer under one limb of the policy may erode the available limit for the other claims. The impact depends upon the D&O program structure and in the absence of a quarantined Side A limit, the individual insured parties can be significantly disadvantaged. 

ASIC v Star directors and officers illustrates the importance of considering program structure and limit adequacy together, particularly in the context of parallel regulatory enforcement action and shareholder claims.

Questions for policyholders to ask their brokers and advisers include:

• Should we purchase Side C cover and if so, why? 
   
• Should Side C be moved into an existing captive insurer? 
   
• Do we need to change our program structure to ensure that Side A is prioritised and quarantined so directors are not exposed if securities actions are commenced against the company?

Insightful judgments like ASIC v Star directors and officers also have the potential to shift the commercial insurance market. Based on insights shared with the authors from various brokers, insurers and clients, this case is unlikely, in and of itself, to shift the current soft D&O market conditions in Australia. Even though the case does provide some informative insights into corporate governance, it does not elicit new legal principles. The decision turned on its facts. It is therefore unlikely to have a material impact on pricing or terms for D&O insurance.

That said, policyholders should be prepared to respond to potentially more pointed questions at renewal of the D&O program around governance processes and the inner workings of the board.

Practical takeaways for policyholders

ASIC v Star directors and officers provides a useful factual backdrop for identifying the following practical considerations for D&O policyholders:

• Assess D&O program structure and limits holistically. Companies which are potentially exposed to regulatory enforcement and securities claims should consider whether existing D&O program limits are adequate to respond to concurrent Side A, Side B and Side C exposure over an extended period. 
   
• Understand deeds of indemnity and the interaction with insurance. Directors and officers should be familiar with the scope and limits of any deed of indemnity, including how it operates alongside the D&O policy over the life of proceedings. 
   
• Treat governance quality as part of insurance risk management.  Effective risk‑escalation frameworks, disciplined preparation of board materials and robust contemporaneous records materially affect the ability to defend D&O claims. 
   
• ASIC v Star directors and officers is unlikely to change the soft D&O market.