There are several types of D&O policies currently available and they are generally separated into three categories: Public Company, Private Company and Non-Profit Entities
Public Company D&O has attracted a tremendous amount of attention in recent years. This stems from the ever changing regulation of public companies along with numerous high profile failures. Many of the allegations facing directors and officers emanate from actual or alleged accounting irregularities (including restatements) and securities fraud. With Public D&O coverage, the entity is generally covered for only SEC related matters. Mergers, acquisitions, or divestiture activities heighten the risk of a potential claim.
Private Company D&O is generally written in conjunction with Employment Practice Liability Insurance. The policy usually extends to provide entity coverage to most types of claims, and provides coverage to the employees of the corporation as well. About half of all claims filed against privately held companies will stem from employees alleging Employment Practice violations. The rest of the claims are brought by shareholders, customers, suppliers, competitors and even governmental bodies.
Non-profit D&O has a similar structure to a Private Company Policy, but can also extend coverage to committee members and volunteers. Claims against non-profit directors and officers come from donors, employees, service recipient vendors, competitors and governmental bodies. Litigation can be costly and become a financial burden to the non-profit entity.
Side A coverage is designed to insure D&O losses that are not indemnified by the company. This can occur when:
- The company refuses to indemnify the individuals, even though it may be permitted to or required to do so in accordance with the fullest extent of the law;
- The company is financially unable to fund the indemnification, as in bankruptcy or financial insolvency; or
- The law does not permit the company to indemnify the Ds/Os, as in a derivative settlement or judgment, or excluded criminal convictions, fraud determinations and the like (e.g. public policy matters).
Krauter & Company’s Management Liability Group has extensive experience placing D&O coverage for each type of program. Many Krauter team members have professional experience as underwriters, offering clients a unique perspective and benefit to program placement.