Directors and Officers Insurance

The actions of the directors or officers of any business or organization -- even a local volunteer organization – are vulnerable to lawsuits. Statland & Katz’s stand-alone directors and officers insurance policy covers not only officials of non-profits, but employees, volunteers, committee members, trustees and the organization itself. What's more, coverage goes beyond conventional exposures to include claims for discrimination, wrongful termination and sexual harassment.

Directors and Officers liability Insurance (often called D&O) is payable to the directors and officers of a company, or to the organization(s) itself, to cover damages or defense costs in the event they suffer such losses as a result of a lawsuit for alleged wrongful acts while acting in their capacity as directors and officers for the organization. Such 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. It has become closely associated with broader management liability insurance, which covers liabilities of the corporation as well as the personal liabilities for the directors and officers of the corporation.
 

Under the "traditional" D&O policy applied to "public companies" (those having securities trading under national securities exchanges), there are three (3) insuring clauses. These insuring clauses are termed: Insuring Clause 1 (Side-A); Insuring Clause 2 (Side-B); and Insuring Clause 3 (Side-C). Contemporary (competitive) D&O policies also provide for Insuring Clause 4 (Side-D), which provides for a $250,000 sublimit for investigative costs coverage related to a shareholder derivative demand.

Side-A (Insuring Clause 1) provides coverage to individual directors and officers when not indemnified by the corporation (as a result of state law or financial capability of the corporation) Side-B (Insuring Clause 2) provides coverage for the corporation when it indemnifies the directors and officers (corporate reimbursement) Side-C (Insuring Clause 3) provides coverage to the corporation itself for securities claims brought against it.

More extensive (broader) coverage can be obtained for individual directors and officers under a Broad Form Side-A DIC ("Difference in Conditions") policy purchased to not only provide excess Side-A coverage but also to fill the gaps in coverage under the traditional policy, respond when the traditional policy does not, protect the individual directors and officers in the face of U.S. bankruptcy courts from wrongfully deeming the D&O policy a part of the bankruptcy estate and otherwise more fully protect the personal assets of individual directors and officers.