- Side A Coverage: This protects directors and officers when the company cannot or will not indemnify them due to insolvency or other reasons.
- Side B Coverage: This reimburses directors and officers for legal expenses and damages awarded in lawsuits, even if the company indemnifies them.
- Side C Coverage (Entity Coverage): This directly covers the company itself for claims brought against directors and officers.
Read: Understanding Mechanical Breakdown Insurance: A Comprehensive Guide
Factors to Consider When Choosing D&O Insurance
Choosing the right D&O insurance policy requires careful consideration:
- Company Size and Industry: The size and industry of your company will influence the specific risks and coverage needs.
- Financial Limits of Coverage: Carefully evaluate the policy’s limits of liability to ensure it provides adequate protection for potential lawsuits.
- Deductible Options: Policies typically have deductibles, which represent the amount the company pays before the insurance kicks in. Choose a deductible that balances affordability and risk protection.
- Exclusions: Understand what types of actions or claims are excluded from coverage under the policy.
- Claims-Made vs. Loss-Occurring Policies: “Claims-made” policies cover claims filed during the policy period, regardless of when the incident happened. “Loss-occurring” policies cover incidents that occur during the policy period, even if the claim is filed later.
Conclusion
In today’s complex business environment, D&O insurance is no longer a luxury; it’s a necessity.
By providing a safety net for directors and officers, D&O insurance fosters a culture of responsible leadership and allows executives to make informed decisions with greater confidence.
By investing in D&O insurance, companies can attract and retain top talent and ensure the continued success and stability of their organization.
Remember, D&O insurance is a critical tool for mitigating risk and protecting the valuable leadership team that steers your company forward.
