Mr. McDonough may deserve a pass for his pessimistic take on policy language. Princeton was recently sued and it was clear the defense costs were going to exceed policy limits. The school's insurer denied the claim, even though it was clear--from the company's own marketing materials-- that the company supplied coverage for the risk, Mr. McDonough related.

How a D&O policy will respond in time of crisis can affect what kind of counsel is hired, the defense strategy and the end game, Mr. McDonough said.

"The bottom line is will the policy be there in the worst case." he said.

As part of the discussion, Nicholas Conca, managing principal with Integro Insurance Brokers, said the D&O market remains soft, especially in the financial institutions sector. There have been a number of new entrants, all with credible capacity, and a "slew of new policy forms" like Chartis' Executive Edge, which has a much earlier, pre-claim inquiry coverage trigger for investigations, Mr. Conca said.

The D&O product provides advancement of covered loss when the company fails or refuses to indemnify for any reason.

The litmus test has been if others follow. If they do, the policy form will take hold, and that has happened, reported Mr. Conca.

In addition, because the market is so soft, "any conflict can be resolved in policy language," Mr. Conca noted. "Almost anything is doable in this marketplace," he said, such as language to keep a policy intact even if a company is in bankruptcy.