Today more than ever, D&O coverage can be a vital risk transfer mechanism for businesses seeking to obtain protection in the face of the evolving labyrinth of statutes, regulations and common law rules. (Credit: hxdbzxy/Shutterstock.com) Today more than ever, D&O coverage can be a vital risk transfer mechanism for businesses seeking to obtain protection in the face of the evolving labyrinth of statutes, regulations and common law rules. (Credit: hxdbzxy/Shutterstock.com)

Most insurance policies are sold on a take-it-or-leave-it basis, leaving policyholders with little opportunity to proactively maximize coverage. Directors & officers (D&O) insurance can be an exception to that rule, but only if policyholders understand the negotiating power afforded to them by the large premium payment they have to offer.

Today more than ever, D&O coverage can be a vital risk transfer mechanism for businesses seeking to obtain protection in the face of the evolving labyrinth of statutes, regulations and common law rules. Whether policyholders are negotiating next year’s policy or pursuing coverage under their current policy, they must know how to recognize the soft spots in standard-form language.

Definition of ‘securities claim’

While the name suggests that D&O insurance is a tool to protect directors and officers from liability, modern D&O coverage can also provide valuable protection for the company itself, via so-called “Side C” coverage (Sides A and B cover directors and officers or the company in its capacity as an indemnifying party for the directors and officers). Side C coverage is often limited to “securities claims,” so policyholders must understand what exactly a securities claim is. Unsurprisingly, the scope of the term has been an ongoing source of dispute between policyholders and their D&O insurers. The good news for policyholders is that not all securities claim definitions are created equal.

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