The devil is in the details when negotiating A&D insurance coverage

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Now more than ever, D&O coverage can be a critical risk transfer mechanism for businesses seeking protection from the evolving maze of common law statutes, regulations and rules. (Credit: hxdbzxy/Shutterstock.com)

Most insurance policies are sold on a take-it-or-leave-it basis, leaving policyholders with little opportunity to proactively maximize coverage. Directors and Officers (D&O) insurance may be an exception to this rule, but only if policyholders understand the bargaining power afforded them by paying large premiums they have to offer.

Now more than ever, D&O coverage can be a critical risk transfer mechanism for businesses seeking protection from the evolving maze of common law statutes, regulations and rules. Whether policyholders are negotiating next year’s policy or pursuing coverage under their current policy, they need to know how to recognize weak points in standard language.

Definition of “receivable on securities”

While the name suggests that D&O insurance is a tool to protect directors and officers from liability, modern D&O coverage can also provide valuable protection for the business itself, through so-called “Side C” coverage. (sides A and B cover the directors and officers or the company as indemnifying party of the directors and officers). Side C coverage is often limited to “securities claims,” so policyholders need to understand what exactly a securities claim is. Unsurprisingly, the scope of the term has been a constant source of dispute between policyholders and their D&D insurers. The good news for policyholders is that not all definitions of securities claims are created equal.

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