25
Sep
2003

What To Do When Your D&O Insurance Company Denies Coverage Or Threatens To Rescind The Policy

Corporate Counsel

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PUBLISHED ON: September 25, 2003

The current insurance market dominated by headlines regarding accounting fraud, various stock market meltdowns and September 11th only amplifies the need for Directors and Officers liability insurance coverage. The D&O liability insurance marketplace is now regularly front-page news. These reports include accounts of tripling of premium, quintupling of deductibles and narrowing of coverage.

Recently, insurance companies repeatedly have threatened to avoid the D&O policies they sold by rescinding them. The arguments used to attempt to rescind bought-and paid- for insurance policies sound similar to post-loss underwriting.

As measured by premium volume, the top-three companies together account for almost two-thirds of the market. According to the most recent (2002) report by Tillinghast–Towers Perrin, AIG had a 35% share, Lloyd’s a 14% share and Chubb a 13% share. All the remaining sellers have a 5% or lower share. So much for choice.

Due to the size and complex nature of many D&O claims, assertion of a D&O claim frequently leads to coverage disputes. Insurance companies are familiar with the types of issues that arise when a D&O claim is submitted, but policyholders generally are not. Some problems can be avoided with planning and proper advocacy.