What does a standard D&O policy have?
A standard D&O policy has three insuring agreements, often referred to as sides A, B and C. These D&O insuring agreements specify the degree of coverage provided by a D&O policy and summarize the promise by the insurer to defend & indemnify the policyholder from losses incurred from an insurable event.
Side A: D&O Policy Liability Coverage :
Side A is the first insuring agreement of a D&O coverage and it insures individual directors and officers against losses that the organization is not legally or financially able to indemnify.
What does Side A coverage protect?
Hence, this coverage protects the personal assets of directors and officers in the event the company does not pay defense costs or fund indemnification and is essential to helping organizations attract qualified individuals to serve on their boards
Side-B: Corporate Reimbursement Coverage
Side B, also known as corporate reimbursement coverage, is the second insuring agreement of a D&O policy. As a result, side B reimburses organizations for the expenses they occur when defending their directors and officers in accordance with their indemnification obligations.
What does Side B coverage protect in D&O Policy?
Side-B coverage, therefore, provides organizations with balance sheet protection by agreeing to reimburse the company if it advances legal fees to officers or directors or indemnifies them against losses.
Side C: Entity Coverage
Side-C coverage, sometimes referred to as entity coverage, is the third insuring agreement of a D&O policy. This coverage insures organizations for claims made directly against the organization. It provides entity asset protections and coverage for defense costs.
What does side C coverage protect?
Side-C coverage is often limited to securities claims. Therefore, this coverage for privately held organizations often applies to a wide range of claims against the company from wrongful acts by the organization or its directors or officers.
Takeaway of D&O Policy?!
The above D&O coverage summary was very generic at a high level. We will tell you there are HUGE differences in the insurance contracts offered by various D&O insurance companies. As a result, carriers realized years ago the policy holders rarely ever read the policies prior to putting in claims. What’s even worse is that the brokers don’t either as they get their commission and move on to the next. They simply sell the cheapest price which often means coverage gaps for you the end user. Only after the claim has been denied to do they read every word.
At Metropolitan Risk we suggest that you dig your well BEFORE you are thirsty. Let us assess your current D&O Insurance policy for you;letting you know BEFORE a claim if you have coverage gaps and how you may solve for them. For most Non-Profits Directors and Officers insurance is so critical to maintaining board talent. We suggest time reviewing your D&O is well spent.
In order to learn more about D&O insurance or to find a policy that will be effective and affordable for your organization, contact Metropolitan Risk Advisory Today!
