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Do ‘Side A’ D&O Policies Still Have Value?

Do Side A D&O policies add value at a time when terms of standard “ABC” policies are getting broader? Mark Paccione of Everest Specialty Underwriters argues that they do, and explains the benefits.

By Mark Paccione | Updated on February 07, 2011

The popularity of Side A D&O policies increased dramatically over the last decade. Fueled in large part by the spectacular demise of numerous large companies during the Enron-era, directors and officers began to better appreciate the importance of high quality insurance coverage for non-indemnified losses.

One of the most attractive selling features of Side A D&O policies has been the extraordinarily broad coverage terms in those policies when compared with standard “ABC” D&O policies, which also covered the company’s D&O indemnification and securities claims exposures. However, in today’s highly competitive D&O insurance market, many of those broad Side A coverage features are now being added to the underlying ABC policies. Examples include covering pre-claim inquiry costs and various fines or penalties, amending the Insured v. Insured exclusion to an Entity v. Insured exclusion, and deleting the pollution exclusion and presumptive indemnification provision.

This has caused some insureds to question whether separate Side A D&O policies still have value. In fact, Side A policies continue to provide important and valuable insurance protections for directors and officers which cannot be duplicated through ABC policies, including broader coverage terms, limits solely dedicated to non-indemnifiable losses and greater certainty of coverage in the event of a bankruptcy.

BROADER COVERAGE TERMS

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