If you hold a "board member" position, are considering such a position, or are trying to attract high level professionals to your board, the D&O insurance in place to protect board members is an important consideration. The traditional directors and officers policy is often not enough.
This is a "heads up" regarding the extra coverage (beyond traditional directors and officers insurance) that organizations and board members should seriously consider.
What is Directors and officers liability Insurance?
Often called "D&O", this is liability insurance that protects the directors and officers of a company, or the organization itself, against losses as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers. This coverage can extend to defense costs arising out of criminal and regulatory investigations/trials as well; in fact, often civil and criminal actions are brought against directors/officers simultaneously. Intentional illegal acts, however, are typically excluded from coverage.
Quick Tip: There are 3 sides to a D&O policy
Side A provides directors and officers personal protection when the organization cannot indemnify them (like in the case of bankruptcy or where legally prohibited by bylaws).
Side B reimburses the company for its indemnification obligation to its directors and officers.
Side C is the "entity coverage" that insures the organization when it is sued along with the directors and officers.
Here is the "extra" D&O protection we recommend...
Board members typically need more Side A protection (available as a Standalone Side A Insurance Policy) because the Standalone policy...
- sits on top of the traditional D&O policy to provide additional limits and broader coverage specifically for the individual directors and officers. All 3 sides of a traditional policy share a single policy limit.
- does not have certain exclusions (ERISA, pollution, insured vs insured, etc.) found on the traditional policy.
- can respond on a first-dollar basis in special circumstances.
- drops down (becomes primary) to fill coverage gaps when primary coverage is exhausted, when the underlying insurer fails or refuses to pay, attempts to rescind coverage, or becomes insolvent.
- can respond in a bankruptcy situation, in cases of derivative suits by current shareholders, and where there are limited insurance funds.
The Standalone Side A Directors & Officers policy can help attract and retain qualified board members by offering a broader protection of their assets.
This extra coverage is available to both "for profit" and "non-profit" boards.
We are here to help. If you would like more information or a Standalone Side A Directors & Officers insurance quote, just let us know. Reply here.