10 practical tips to keep in mind when obtaining D&O coverage

1. Cheaper is not always better. Premium doesn't tell the entire story, as one must also consider breadth of coverage, insurer reputation and financial stability.
2. Less is sometimes more. In this era when so-called blended policies are in vogue, one needs to think twice about products such as combined D&O/employment-practices liability (EPL) insurance, which may reduce available limits to the outside directors for securities-fraud exposures for the sake of covering the corporation for its employment practices liability. Two separate and independent policies may be the better choice.
3. Just as all insurers are not alike, all brokers are not alike. Query a broker as to what he or she will do for you in the future, as well as about resources and expertise available within his or her organization. Be sure he or she eanrs the commission, which is part of your premium dollar.
4. Read, read, read and read some more. Directors, officers and risk managers never can have enough knowledge in this area, and articles and conferences appear regularly on key issues such as securities liability, employment practices, corporate governance and current topical issues such as subprime lending and privacy issues as they impact directors and officers.
5. Be sure to review impartial and objective information. Promotional material from insurers and brokers has obvious biases. Consider a subscription to various paid and independent services to gain more impartial and valuable advice. In addition, many law firms issue free and periodic newsletters on important case law and industry developments pertaining to D&O. To be sure that you are gaining a balanced perspective, sign up for newsletters from both firms that practice on behalf of policyholders and those that practice on behalf of insurers. Because of conflicts, firms generally practice predominantly on one side or the other.

6. Talk to the D&O insurer before claims arise. It is helpful to have an interchange of ideas in areas such as the choice of outside counsel for a major claim, the insurer's litigation management guidelines, and other claim-related issues prior to a claim arising, when decisions need to be made quickly and often in the context of coverage issues raised by the claim.
7. Always communicate openly and honestly. Legal considerations aside, many disputes over coverage, litigation management and the application process are alleviated by constructive dialogue. Rule number one: if you are unclear about something, ask. Rule number two: if the insurer requests information from you, respond (after appropriate consultation with legal and insurance professionals), even if to advise that you believe it is inappropriate to provide the information.

6. Never lose sight of who the real adversary is—it's the claimant or plaintiff. Insurers and policyholders should be aligned as part of a defense team subduing their coverage differences to the goal of successfully contesting the claim against them.
7. Never underestimate the importance of solid, long-term relationships. While there are many credible alternatives in the marketplace in terms of products and insurers and in many respects this is unfortunately becoming more of a transactional than relationship business, a solid longstanding relationship is important in the event of a significant claim. Most insurers are more likely to go the extra mile for a long and valued customer.
8. Exercise prudent loss control and risk management in areas such as corporate governance and employment practices. In today's litigious environment, directors and officers must be practical enough to realize that they never will completely eliminate the incidence of claims and litigation. The severity of these claims can be greatly reduced, however. The likelihood of a successful defense can be increased through prudent management.

The Roles of Agents, Brokers and Other Producers