Directors & Officers liability insurance is like any other policy in that you really want to know what it says before you have to file a claim. In fact, this is even more important in a D&O policy than in, say, an auto insurance policy or workers' compensation, because the D&O needs will vary so much from one company to another that it is absolutely requisite that you negotiate a plan that works for you. Here's what you're looking for when reviewing your management liability insurance:
1. Criminal Act Exclusions
Fundamental to just about any management liability policy, you'll find a criminal acts exclusion. This means that while your directors and officers may be protected in the event of most allegations, any deliberate criminal act, such as insider trading or profiteering, will not be covered. It's important that any high-ranking member of your staff is well versed in laws and regulations applying to your industry to avoid these scenarios.
2. Notification Requirements
As with any insurance policy, filing claims in a timely manner is of the utmost importance. There are plenty of examples to choose from of companies that had a valid claim, that had everything in order, but failed to file their claim and notify their insurer within the policy period or the extended reporting period. You want to know the notification requirements in your policy, and it''s generally a good rule of thumb to follow to let your insurer know any time you're even considering the possibility of filing a claim.
3. Insured vs. Insured
Most policies will have an insured vs. insured exclusion, meaning that should a former or current director sue the company, you might not be covered. This is to ensure that companies cannot engage in collusion to collect insurance money with a bogus lawsuit.
4. Exceptions To Exclusions
Most exclusions allow for the possibility of exception. For instance, in the case of an insured vs. insured exclusion, an exception may be made in the case of whistleblower suits. You will want to talk to your insurer and negotiate specific exceptions into your policy to ensure that you are covered against the unique risks that your business faces.
5. Unique Details
Ultimately understanding your D&O policy is all about the details specific to your policy. No two plans are the same, because no two companies are the same.
The only way to really get a hold on your policy and to know when you are and are not protected is to study it front to back, and call your insurer with any questions you might have. Go through your plan with a highlighter and pick out the parts that you'd like to renegotiate or have clarified. It's better to know now before you need it than to try and debate the terms of your plan when the time comes to file a claim.
About Axis Insurance
At Axis Insurance Services, we aim to help our customers identify their exposures and protect themselves. Founded in 1999, we offer insurance programs to a wide variety of professionals and industries including attorneys, real estate, healthcare, architects, and more, and also have a wholesale division. We pride ourselves on offering flexible insurance coverage tailored specifically to each customer’s needs. To learn more about our solutions, contact us at (201) 847-9175 to speak with one of our professionals.
