Directors' & Officers' Coverage Priorities in the Financial Crisis: A Seven-Point Inspection for Your D&O Policy

10/15/2009

Over the past year, the “financial crisis” has become a euphemism meaning different things to different people. For employees, the “financial crisis” may mean the loss of savings, wages or even a job. For thousands of homeowners, the “financial crisis” could suggest “foreclosure.” Alternatively, business owners may equate the “financial crisis” with an inability to obtain capital or a loss of revenue. For directors and officers, however, the “financial crisis” may also mean increased exposure, both in size and number, to claims by shareholders and regulators.

While opinions vary regarding the solution to the “financial crisis” as a whole, directors’ and officers’ (“D&O”) insurance is specifically intended to control the risk of suits, investigations and other proceedings against directors and officers. Yet, the dynamics of the current “crisis” have created new coverage issues and highlighted others with which every insured director or officer should be aware. Whether acquiring or renewing coverage or responding to a current claim, insured directors and officers should take inventory of their coverage to ensure that when viewed in the context of the “financial crisis,” their policies’ terms provide adequate protection against and those claims likely to arise from the present recession.

In particular, here is a series of questions constituting a seven-point inspection for your D&O policy. Understanding the issues presented by these questions and the analysis that follows will better position insureds to prepare for and respond to claims that otherwise could create a true “financial crisis” for corporate policyholders, directors and officers.

To read the full article, click on the PDF linked below.

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