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 Director & Officer Liability Insurance
Listed below are some of the standard features you will find in all Directors and Officers liability policies. This document is meant to be a general overview of Directors and Officers coverage. For more detailed information on a specific carrier's coverage feature, refer to the coverage specifications portion of your proposal.
Your policy will have three insuring agreements:
Coverage A: Directors and Officers Liability Coverage A pays on behalf of the directors and officers for any alleged wrongful act in their capacity as directors and officers. This coverage does not apply if the individual insureds are indemnified or entitled to indemnification by the corporation—coverage would then fall under Coverage B.
Coverage B: Corporate Reimbursement Coverage B is the corporate reimbursement portion of a Directors and Officers liability policy. The policy will pay on behalf of (or will reimburse to) the corporation the amount the corporation is required (or permitted) to pay as indemnification to the directors and/or officers.
Coverage C: Entity Coverage for Securities Claims (Public company policies) Employment Practices Coverage (Private company policies) Coverage C pays on behalf of the Corporation Loss from Securities Claims for any actual or alleged Wrongful Acts by the Entity, Employee and Director or Officer. Coverage C is replaced by Employment Practices coverage for most private company policies.
Determination of the amount of defense costs, settlements or judgements "allocated" to (1) covered and uncovered acts / claims against insured directors and officers, and (2) claims against covered parties (directors and officers) and uncovered parties (the corporation and other uninsured defendants).
The D&O contract typically applies on an "all risk" basis to claims made within the policy period for "wrongful acts" commonly defined as: "any breach of duty, neglect, error, misstatement, misleading statement, omission or act by the directors or officers of the Company in their respective capacities as such, or any matter claimed against them solely by reason of their status as directors or officers or the Company."
D&O coverage is for claims made during the policy period for Wrongful Acts committed prior to or during the policy period.
The Limit of Liability is the maximum amount of insurance available to pay for claims under a policy. Directors and Officers carriers typically offer an annual aggregate limit of liability. This means that one amount is the maximum available for all claims made during the policy period.
The Retention will apply to each and every claim made during the policy period. For non-indemnifiable claims, the Retention will be $0.
Several enhancements are becoming standard within the policy or by endorsement:
As is common with most insurance policies, certain exclusions do apply. Due to the "all risk" basis of this contract, thorough examination of policy exclusions is of the highest priority. Standard exclusions are organized by category below: Exclusions Based Upon Pre-existing Wrongful Acts
Exclusions Based Upon Public Policy
Exclusions Based Upon Insurance Available Elsewhere
Exclusions Based Upon Known Problematic Areas
Exclusions Based Upon Policy Intent
Exclusions Based Upon Underwriter Uncertainty
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