Insurance Risk Management Consulting » c level executive liability coverage

Director’s and Officers Liability Coverage Part Five

Premier Risk Management Admin — Fri, 26 Jun 2009 06:41:20 +0000

You should also be aware that your insurer may not cover you for securities fraud.

A very common reason to buy D&O insurance is for protection against securities-law violations. Policies provide specific coverage for these claims while at the same time exclude claims related to fraud.

One way to soften this situation is to have clause in the policy that specifies that the fraud exclusion will not take effect until there has been final adjudication by a court of law confirming that in fact a fraud did occur. This at least insures coverage if you settle out of court.

Director’s and Officers Liability Coverage Part Four

Premier Risk Management Admin — Thu, 25 Jun 2009 00:38:42 +0000

Outside the US directorship may not be covered.

D&O policies may provide international coverage but the fine print reveals that it is only “to the extent possible.”

This is very vague. Some countries including India, China, Russia and Brazil require that companies maintain local D&O policies. It is therefore important to purchase additional D&O coverage outside the US.

Director’s and Officers Liability Coverage Part Three

Premier Risk Management Admin — Tue, 23 Jun 2009 00:36:52 +0000

To continue our discussion of D & O liability coverage, let’s look at an aspect of claims denial.

The insurance carrier may deny coverage for reasons unrelated to the claim against you. Insurers can rescind a D&O policy – return the premium and pretend as though there had never been coverage – if they conclude at a later time that the application contained false or misleading information.

Seems reasonable. Insurers today require that financial statements be attached to the application. The problem here is that if your CFO cooked the books unbeknownst to you. This could nullify the policy.

To avoid this scenario affecting other board members that have clean hands, it is important to pay attention to the severability clauses contained in the policy. This prevents the insurer from using the acts of one bad actor to disqualify other officers and directors from coverage.

However, an even better scenario is to find an insurer to write a policy that is nonrescindable and noncancelable.