Question 1

What's the difference between Side A, B, and C coverage?

Accepted Answer

Side A protects individual directors and officers personally when the company can't or won't indemnify them — this matters when the company is bankrupt or the matter is one where indemnification is barred (some derivative suits). Side B reimburses the company for indemnifying its directors out of corporate funds. Side C covers the company entity itself for securities claims (public companies) or specifically endorsed entity coverage (private companies). Most quality D&O policies include all three.

Question 2

Are nonprofit boards sued for D&O claims?

Accepted Answer

Frequently. Nonprofit D&O claims commonly arise from employment practices (often the most common), donor and beneficiary disputes, regulatory investigations from the IRS or state attorney general, contract disputes with vendors, and allegations of breach of fiduciary duty. Florida nonprofit board members serving without D&O coverage face the same personal exposure as for-profit directors. Nonprofit D&O is typically more affordable than for-profit due to lower limits and lower exposure profiles.

Question 3

Does D&O cover employment claims?

Accepted Answer

Many D&O policies include or can be endorsed with EPL (employment practices liability) — covering wrongful termination, discrimination, harassment, and retaliation claims against directors and officers personally. Larger companies typically buy a separate EPL policy with broader coverage extending to all employees and managers, not just executives. Either way, employment claims represent the largest category of D&O claim frequency for both public and private companies.

Question 4

Why is D&O written on a claims-made basis?

Accepted Answer

Claims-made coverage triggers when the claim is filed during the policy period, regardless of when the alleged wrongful act occurred. This structure works for D&O because claims often surface years after the underlying decision. The tradeoff: if you let coverage lapse, prior-acts coverage disappears and you need expensive 'tail' protection (also called extended reporting period) to maintain coverage for past actions. Always plan tail coverage when changing carriers or winding down.

Question 5

What does D&O NOT cover?

Accepted Answer

D&O excludes intentional fraud, criminal acts, illegal personal profit, bodily injury and property damage (those are GL claims), pollution events, and ERISA claims (which need separate fiduciary liability coverage). Most D&O also excludes 'insured vs. insured' claims (one director suing another), with some carve-outs for derivative suits and bankruptcy-trustee actions. Pre-existing or known-prior-circumstance claims at policy inception are also typically excluded.

Question 6

What's tail coverage and when do I need it?

Accepted Answer

Tail coverage (extended reporting period) extends the claim-reporting window beyond the policy expiration date — typically 1, 3, or 6 years. It's essential when a company is sold, dissolved, or merged because new ownership often won't continue the old D&O policy. Without tail, claims surfacing after closing have no coverage. Tail premium is usually 75%–250% of the expiring annual premium and must be elected before the policy actually expires.

Question 7

How is D&O priced for a Florida private company?

Accepted Answer

Premium drivers include revenue, industry class (financial services, healthcare, and biotech are highest), board composition and outside investors, prior litigation, financial stability, and selected limits. Florida-specific factors include AOB exposure for certain industries, SEC regional enforcement intensity, and shareholder litigation history. Florida private-company D&O typically runs $4K–$12K for $1M limits at startup; mid-size companies pay $15K–$50K for $5M limits.

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