20 Ways To Improve Directors and Officers Liability Coverage or Practices

Directors and officers (D&O) liability insurance is a complicated line of coverage that requires special expertise. Understanding the proper application of D&O coverage forms and keeping abreast of developments that affect the D&O insurance field can be challenging. Knowing what characteristics to be on the lookout for when analyzing D&O coverage forms, such as "claim" definitions, extent of entity coverage, severability language in exclusions, and defense provisions, can help distinguish you from other D&O insurance and risk management professionals.

In this practical guide, former IRMI Research Analysts Bob Bregman and Sean Jordan provide 20 specific, straightforward tips that can help maximize coverage, minimize exposures, and mitigate the potential for claims denials. Each of the tips was chosen based on their importance, timeliness, and practicality, and fall under four categories: D&O coverage basics, D&O defense provisions, D&O exclusions, and excess D&O coverage.

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• D&O Coverage Basics
  

  An understanding of D&O coverage basics, such as the three key insuring agreements (directors and officers, corporate reimbursement, and entity securities), is crucial in purchasing the broadest possible policy. Other key D&O elements addressed in this section include severability, definition of "claim," extended reporting, and retention provisions.
  
  

• D&O Defense Provisions

  Defense provisions in D&O policies are among the most important policy terms. In this section, you will learn how to spot crucial variations in defense wording, the importance of "all allegations" defense coverage provided by duty to defend forms, and techniques to make counsel selection provisions work in your favor.
  
  

• D&O Exclusions

  Having the knowledge to negotiate essential modifications to D&O policy exclusions can vastly expand the scope of coverage that the policy will ultimately provide. Some of the exclusions discussed in this section include the prior and pending litigation exclusion, bodily injury/property damage liability exclusion, and the major shareholder exclusion.
  
  

• Excess D&O Coverage

  Avoiding so-called "strict" exhaustion provisions in excess D&O policies is important in steering an insured clear of (1) coverage disputes and (2) receiving less than full reimbursement for a loss that penetrates a D&O program's primary layer of coverage.

For over 40 years, International Risk Management Institute, Inc. (IRMI), has been a premier provider of practical and unbiased risk management and insurance information to corporations, law firms, government, and the insurance industry. This information is developed by the most experienced research and editorial team in insurance reference publishing in partnership with a host of industry practitioners who work with us. We take great pride in giving you up-to-date, objective, and practical strategies, tactics, and solutions to help you succeed and prosper in a changing insurance and risk management environment.