Notification and Question of Coverage under a D&O Claims-Made Policy

June 17, 2013

We have a client that is a board member of a nonprofit organization. The organization closed its doors in 2011. After they closed their doors, one of their employees continued to use a credit card to purchase items. The bank sued the employee for the money that she used to purchase the items since her name was on the receipts and the credit card. The organization was notified in November 2011, but our client was not notified until May 2013.

The D&O policy was claims-made and expired in 2012; the insured did not purchase any tail coverage. We believe there is no coverage under the D&O policy. However, our question is this: Does our insured, who was a board member at the time the organization was notified of the lawsuit (she was not notified) still have coverage now since she just found out about the claim? If she had found out about it in 20,1 she would have turned in a D&O claim at that time.

Ohio Subscriber

Your initial reaction is correct. Since the D&O policy is claims-made and expired in 2012 there is no coverage for a 2013 claim filing for any previous insured if the extended reporting (tail) coverage was not purchased. Since this is a not-for-profit organization you may want to check this client's homeowners or personal umbrella policy for possible, potential coverage.