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Priority Of Payments Provision

Priority of Payments Provision

Definition

A provision found within most, but not all, directors and officers (D&O) liability insurance policies that sets forth the order in which policy proceeds will be paid out to the various insureds under the policy. The provision also states that policy proceeds are the property of the directors and officers, rather than a bankruptcy trustee. Priority of payments provisions were added to D&O policies because in the early 2000s, numerous controversies began to arise as to whether the proceeds of a D&O policy belong to a bankruptcy trustee or to the individual insured directors and officers.

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