21
Nov
2011

Understanding D&O Policy Allocation

Law360

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PUBLISHED ON: November 21, 2011

Corporations buy directors and officers insurance to protect their senior managers and board members from operations-related liabilities.

Most D&O policies are reimbursement, or pay-on-behalf-of, policies under which the insurer does not have a duty to defend. A duty-to-defend carrier must appoint, hire and control defense counsel for its policyholder, and must pay 100 percent of defense expenses if even a sliver of a third-party claim is potentially covered.

By contrast, under most D&O policies, the policyholder retains the duty to defend itself, and is entitled to reimbursement from the insurance company to the extent the claimant’s allegations are potentially covered and aimed at the insureds.