Directors and Officers insurance provides protection for directors, officers and other individuals involved in management of public, private and not for profit entities from lawsuits alleging improper performance of their duties. Claims which may trigger coverage could be made by employees, stockholders, clients, regulators and competitors. D&O policies are generally written on a claims made basis.
Many D&O policies contain four types of coverage. One insuring clause of the policy provides coverage for individual directors and officer when not indemnified by the entity (Side A coverage). Another insuring clause provides coverage for the corporation when it indemnifies the officers and directors (Side B coverage). A third insuring clause provides coverage to the entity itself for claims arising from securities litigation or other specific types of claims not covered by commercial general liability policies (Side C coverage). Finally, a fourth part of the coverage provides a sublimit for investigative costs coverage related to shareholder derivative demands (Side D coverage).
A number of coverage disputes arise under Directors and Officers insurance policies including application of the “insured v insured” and “dishonest, criminal or fraudulent conduct” exclusions; effect of a severability clause; availability of rescission remedies, allocation disputes; failure to maintain adequate insurance; treatment of policy proceeds as an asset of the bankruptcy estate; application of “related claim” and “prior and pending” provisions; and definition of a “wrongful act” and “claim.”
If you have any questions concerning Directors and Officers Insurance or want to know more about our insurance practice, please contact our insurance attorney for a free telephone consultation 703.528.1021.
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