There are several D&O policy provisions that directors and officers and their insurance agents or brokers should look for to help ensure that the policy will remain in force even in bankruptcy and do what it was originally intended to do–protect the personal assets of directors and officers:

Include in "priority of payments" language (also known as "order of payments" language) a provision that, in the event of claims against directors and officers and the entity itself, the D&O policy will first pay non-indemnifiable claims of directors and officers (Side A claims) before paying indemnifiable claims on behalf of the corporation (Side B claims) and claims against the corporation itself (Side C claims). This would not prevent an entity-only claim from depleting policy limits, but in the event of concurrent claims against the entity and directors and officers, it would dictate that the D&Os be paid first.
Automatically include in the definition of "insured" a debtor-in-possession or equivalent status to provide ongoing coverage after a bankruptcy filing. As mentioned earlier, the debtor-in-possession is a separate legal entity from the insured company, and would not itself be an insured under the policy absent this provision–nor would directors and officers acting on behalf of the debtor-in-possession.
Amend the ever-present "insured vs. insured" exclusion to exempt (i.e., carve back) claims made against directors and officers by the bankruptcy trustee, creditors' committee and other bankruptcy creations that are deemed to be insureds under the policy. This is to prevent the exclusion of claims made by such parties against directors and officers.
Include a provision by which the insurance company and all insureds agree to waive and release any automatic stay that may apply to the D&O policy and/or the policy proceeds, and agree not to oppose any efforts to obtain relief from such stay. Otherwise, as mentioned earlier, the automatic stay could operate to prevent the payment of policy proceeds to or on behalf of directors and officers.
Review the D&O policy's cancellation and change in control provisions to be sure that bankruptcy does not trigger automatic termination of the policy or conversion to run-off status.
Guard against presumptive indemnification language that would impose a "Side B" retention on directors and officers when there is no indemnification provided by the corporation. The policy's "Side A" coverage for non-indemnifiable claims against directors and officers is always written with no retention. But some policies are worded to presume indemnification by the corporation "to the fullest extent permitted by law" to impose the Side B retention, which can be sizeable. The directors and officers should guard against the possibility of having to bear the cost of such retention when the corporation does not actually provide indemnification.

It is now possible with some D&O policies to include a dedicated "Side A" limit in addition to the policy's aggregate limit of liability. Such limit would not be accessible to entity claims, and would be preserved even if the policy's aggregate limit is depleted by "Side B" or "Side C" claims. Additionally, "Side A"-only policies have been available for several years now, and the purchase of an excess "Side A" policy in addition to the traditional D&O policy has become more common. Also available are enhanced versions of excess "Side A" that include "difference in conditions" features which provide the added benefit of dropping down to cover claims that–for any of several reasons–are not paid by the underlying traditional D&O policy.

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Hijacking D&O Coverage

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