D&O insurance responds to claims against directors and officers, and in some structures against the company itself. The tower is usually described in three sides.
Side A covers individuals where the company cannot indemnify them, whether by law or insolvency. Side B reimburses the company for indemnification it provides. Side C covers the entity for securities claims, in public company policies.
Claims made. Coverage attaches to claims first made during the policy period and reported as required. Late notice is a genuine coverage defence. Notice of circumstances that may give rise to a claim, given before renewal, preserves coverage under the expiring policy.
Key exclusions. Conduct exclusions for fraud and personal profit, usually requiring a final adjudication; insured versus insured exclusions, which are why carve-backs for derivative suits and bankruptcy trustees matter; prior acts and prior notice; bodily injury and property damage; and contractual liability.
Allocation between covered and uncovered parties and claims is a recurring fight, and a pre-agreed allocation provision reduces it.
Consent to settle and defence costs provisions determine who controls the defence and whether costs erode the limit.
Run-off. On a sale, a tail policy for the outgoing directors is standard and should be negotiated in the purchase agreement, not afterwards.