presumptive indemnification provision
A clause found in most directors and officers (D&O) policies, stating that, in a claim situation,
it is presumed that the corporate organization has indemnified its directors
and officers to the fullest extent permitted by law, regardless of whether the
corporation does, in fact, indemnify the directors and officers. The provision
is significant because the typical D&O policy includes a substantial self-insured
retention (SIR) for corporate reimbursement (Side B) coverage but no retention for
"direct" (Side A) D&O coverage. At one time, corporations attempted to avoid
paying the Side B retention by simply electing not to indemnify the insured
directors and officers, forcing the insurer to provide first dollar coverage
for the directors and officers. To prevent this, D&O insurers began to insert
presumptive indemnification provisions within their forms. See
Side A coverage;
Side B coverage.
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