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Inside a Directors and Officers Insurance Policy

Posted on: July 11, 2014 by Caitlin Morgan

Inside a Directors and Officers Insurance Policy

Inside a Directors and Officers Insurance Policy

Directors and Officers (D&O) insurance is needed for all types of businesses including assisted living facilities, nursing homes and other healthcare and medical facilities. Policies can be written to cover the directors and officers of for-profit businesses, privately held firms, non-profit organizations and educational institutions. These policies cover claims resulting from managerial decisions that have adverse financial consequences. Protection is provided in the event of any actual or alleged error, misstatement, omission, misleading statement or breach of duty.

Some important factors to be aware of when it comes to D&O claims include the following:

  • Claims can come from employees, clients, and stockholders.
  • Typically, claims are settled without going to trial – yet defense costs, even in successfully defended cases, tend to be very high.
  • Suits can be brought against the organization itself regardless of whether individual board members are named.

Moreover, D&O policies are not standardized and tend to be quite complex. Generally speaking, there are multiple types of policies, each responding to a different need. Side A coverage insures individual directors and officers to protect their personal assets. Side B coverage reimburses the company for costs incurred when the company indemnifies directors and officers in a claim. Side C coverage protects the company itself when it is named as a defendant in a claim.

There are also common exclusions within a D&O policy This includes no coverage for intentional misconduct, dishonest acts, illegal actions, punitive damages, fines, taxes, and penalties, among others. In addition, depending on the policy, there may be gaps in coverage that need to be evaluated. Close attention has to be paid to the following:

  • Incidents that occur before the policy is in effect
  • Claims that occur after the end of the policy term
  • Definitions of key terms, e.g., “wrongful act,” “claim,” “loss,” that constrict coverage
  • Reimbursement of expenses rather than payment as incurred
  • Deduction of legal defense costs from the maximum amount the policy will pay for a claim
  • Defense costs for excluded claims

At Caitlin Morgan, we can provide D&O insurance for several key segments including nursing homes and assisted living facilities and healthcare facilities. There are multiple ways to construct D&O coverage, with combinations of policies that maximize protection and minimize gaps. Talk to us about the various policies available and how to best protect your insureds from directors and officers claims. You can reach us at: 877.226.1027.

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Posted in: Directors & Officers