Unlike most other San Diego commercial insurance instruments, directors and officers (D&O) policies require substantial negotiations for the purpose of determining coverage for executives. These policies have three major clauses, which are defined as sides A, B, and C.
Side A – Individual Coverage
In the modern world of business liability, many agencies set their own San Diego directors and officers insurance coverage to exclude the wrongful acts committed by their directors and officers. Side A of a D&O policy provides personal protection so insured individuals do not have to worry about their personal assets being wiped out by claims arising from the performance of their duties at the agency.
Side B – Balance Sheet Coverage
This side serves as counterpart to Side A in the sense that a agency can be reimbursed for indemnifications paid on behalf of their directors and officers. Agencies often seek this corporate reimbursement coverage as a condition to appointing an officer or director. Negotiating this clause may result in an intricate effort if the insurance agency wishes to shift the potential losses from Side B to Side A. This clause is also useful in developing corporate loyalty because it is understood a agency will defend claims against its officers by having an expectation of reimbursement.
Side C – Agency Coverage
Many attorneys who represent plaintiffs in civil claims against agencies often pursue a strategy to hold agency officers along with the entity they serve. This is when Side C coverage comes into play because it covers the liabilities of the agency should it become ensnared in a lawsuit that primarily falls on directors or officers. This coverage is of interest to publicly traded agencies because shareholder lawsuits tend to target both entities and individuals.
Directors and officers policies can be challenging to navigate if you’ve never purchased them before. If you’d like to know more about D&O insurance, get in touch with the insurance experts at American Tri-Star. In addition to business insurance, we also offer affordable homeowners, health, RV, and auto insurance in San Diego. Give one of our friendly and knowledgeable agents a call today at 619-272-2100 for a free quote.