Directors and Officers Insurance in Massachusetts

What sorts of actions and decisions is D&O insurance able to cover?

D&O insurance might cover a broad range of actions and decisions that senior leaders could take. Depending on a policy’s terms, items like the following may be covered:

• Misrepresentation
• Misleading statement
• Fund misappropriation
• Decision leading to bankruptcy
• Regulatory violation
• Legal violation
• Poor corporate governance

These protections generally don’t apply when an action is criminal and/or intentional. They also generally don’t protect against simply bad business decisions, as it’s a leader’s responsibility to know the business landscape. For honest errors that have serious negative consequences, however, the protections offered can be quite valuable.

An insurance agent who specializes in D&O insurance can check what exactly a particular policy would likely cover. They’ll also be familiar with the risks that senior leaders are exposed to, and can accordingly recommend coverages.

Will D&O policies cover breaches of fiduciary responsibilities?

Exactly what any policy will cover depends on the policy’s terms, and protections certainly can vary. There usually are policies that extend protection to fiduciary breaches, however. A knowledgeable agent can check which policies provide such protection.

What are directors and officers Side A, Side B, and Side C policies?

A few different types of directors and officers policies are available. What risks and parties they cover are commonly referred to as “sides.” There are three main ones:

• Side A normally offers senior leaders, themselves, protections against covered lawsuits. This side may apply when a business or nonprofit doesn’t have sufficient funds to cover an individual lawsuit, which is a risk if the organization becomes insolvent or has insufficient financial reserves.
• Side B normally covers businesses and nonprofits against covered lawsuits. This side may protect the organization if it’s sued because of a senior leader’s actions.
• Side C is normally used by public companies that need coverage for securities-related risks. It might occasionally be needed by private businesses.

What expenses D&O coverage pay when there’s a claim?

In the event of a covered lawsuit or claim, D&O coverage usually covers most expenses that are directly associated with the suit. These can include attorney fees, court costs, settlements, and judgments. Payment is typically subject to a deductible and limit, along with any other applicable conditions.

How is D&O coverage handled during mergers?

It’s often particularly important to maintain D&O coverage for all senior leaders who are involved in a merger. Such a major event may carry an increased risk of lawsuits.

Maintaining coverage during mergers is a complex situation. In most cases, leaders of both businesses should have coverage throughout the process. This is something that leaders should seek the guidance of an experienced and highly knowledgeable insurance agent who specializes in D&O.