Allocation of Loss in Directors and Officers Insurance Policies

August 10, 2011

In the context of directors and officers (D&O) insurance, the word allocation is used to describe the apportionment of loss (defense costs, settlements or judgments) between (1) covered and uncovered parties, (2) covered and uncovered claims, and (3) duties performed in covered and uncovered capacities. Allocation is one of the most important, yet most frequently misunderstood, components of claim resolution between insured and insurer.