What scenarios are covered under D&O insurance?
D&O insurance is able to cover a variety of situations where leaders could face liability lawsuits or claims. The exact situations that a policy covers depends on its terms and conditions, but they might include things like:
- Misrepresentations or misleading statements
- Violations of regulations or laws
- Decisions contributing to bankruptcy
- Misappropriation of funds
- Poor corporate governance
It should be noted that D&O normally doesn’t extend coverage to intentional misconduct or criminal activities.
Does D&O insurance cover fiduciary breaches?
The unique obligations that fiduciaries have present additional factors when evaluating D&O policy options. Policies that cover fiduciary risks are available, but anyone holding this responsibility should work with a specialized D&O agent to confirm that this risk is covered by a policy.
What do the terms Side A, Side B, and Side C indicate in D&O policies?
D&O policies are often segmented into Side A, Side B, and Side C, each of which details specific protections:
- Side A: Might offer personal liability protection to insured leaders when organizational funds are unable to pay legal fees and settlements, such as in cases of organization bankruptcy or financial insolvency.
- Side B: Might offer liability protection to the organization, by potentially covering legal fees and settlements for lawsuits over to a senior leader’s actions.
- Side C: Might offer specialized securities-related protection, primarily for publicly traded companies. This is occasionally used by private businesses needing entity coverage.
What costs are typically paid by D&O policies?
In the event of a covered claim, D&O will likely help pay attorney fees, court fees, and any settlement or judgment. These are subject to any applicable deductible, limit or other condition. This is broadly consistent with what other liability coverages help pay.
