| DIRECTORS AND OFFICERS INSURANCE PRODUCTS THE NEW BUSINESS NEED CREATES UNIQUE COMPLEXITIES |
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LOSS PREVENTION SERVICES - DIRECTORS & OFFICERS
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| Traditional D&O insurance consists of three types of coverages: "Side A," which provides coverage for the individual directors and officers when the company is unable to indemnify them, "Side B," which insures the company’s obligations to the directors and officers, and "Side C," which insures the company’s own direct liability (usually limited to securities or employment liabilities). New carriers are entering the D&O market that has previously been limited to just a few major insurance carriers that specialized in D&O coverages. Insurers entering the D&O primary market are issuing new policy forms with subtle but critical wording changes. Not only do these provisions create greater tensions between individual insureds and the company, they also pose difficult questions regarding joint defense efforts and litigation strategy. |
"As the SEC becomes more aggressive in its investigation of alleged securities fraud, tensions between insurers and
insureds increase. Insurers, under the guise of "seeking cooperation" and "the need to evaluate liability and damages,"
are demanding that policy holders turn over information relating to SEC investigations. While an insured must cooperate
with its insurer, it is not required to provide the insurer with a road map for denying coverage. Further, insurers are often
seeking privileged information, the disclosure of which could harm not only the defense of the underlying securities case,
but the SEC investigation as well. The law regarding privilege and work product in the insurance context, particularly with
respect to D&O policies, does not guarantee that information provided to the insurers will be protected from disclosure to
third parties. Defense counsel must walk a fine line between providing information legitimately needed for the insurer to
participate in settlement, and waiving privileges to the detriment coverage or defense positions."
© 2007 Farella Braun + Martel LLP
insureds increase. Insurers, under the guise of "seeking cooperation" and "the need to evaluate liability and damages,"
are demanding that policy holders turn over information relating to SEC investigations. While an insured must cooperate
with its insurer, it is not required to provide the insurer with a road map for denying coverage. Further, insurers are often
seeking privileged information, the disclosure of which could harm not only the defense of the underlying securities case,
but the SEC investigation as well. The law regarding privilege and work product in the insurance context, particularly with
respect to D&O policies, does not guarantee that information provided to the insurers will be protected from disclosure to
third parties. Defense counsel must walk a fine line between providing information legitimately needed for the insurer to
participate in settlement, and waiving privileges to the detriment coverage or defense positions."
© 2007 Farella Braun + Martel LLP
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