A Primer on the Three Sides of Directors & Officers Insurance

 

Directors & officers liability coverage has become increasingly essential for companies, whether they are non-profits, privately held, or start-ups preparing for an IPO.

Directors & officers liability coverage has become increasingly essential for companies, whether they are non-profits, privately held, or start-ups preparing for an IPO.

Directors & officers liability coverage has become increasingly essential for companies, whether they are non-profits, privately held, or start-ups preparing for an IPO. Unfortunately, many people who are considering purchasing D&O insurance do not fully understand its three sides of coverage. It is essential that prospective policyholders fully understand these sides so they can purchase policies that are tailored to their specific needs and areas of risk.

Available Coverage

Directors & officers liability coverage can be broken down into three categories:

  • Side A coverage, which protects directors and officers against losing their personal assets if the company cannot cover the cost of indemnification.
  • Side B coverage, which reimburses the expenses a company incurs while paying legal fees and settling claims against its directors and officers.
  • Side C coverage, which provides coverage for the company as a whole in the event that securities-related claims are made.

Each side addresses a distinct risk area that would not be covered by other types of insurance.

Choosing the Ideal Option

When selecting a directors & officers insurance policy, decision-makers should consider the assets of the company and its officers and directors. If the company has limited resources and the directors and officers have substantial assets, Side A coverage may be necessary. If the company faces significant potential liability, Side B and Side C coverage are likely needed. However, decision-makers should always work with an insurance agent to evaluate the three sides of coverage and any complementary policies that can ensure full protection.

 

photo credit: Thomas Hawk cc

Leave a Reply