Structuring Side A Programs: Traps for the Unwary

The popularity of Side A D&O insurance policies (which insure only non-indemnified losses incurred by directors and officers) continues to increase.  As both outside directors and officers become more familiar with the extraordinary protections available through a broad and high-quality Side A policy, it is not surprising that directors and officers are requesting, and public companies are now purchasing, this type of coverage with greater frequency.  However, there appears to be considerable confusion and misunderstandings in the market regarding what to look for in a preferred Side A policy and how to structure a multi-tiered Side A program.  Unlike many standard D&O policy forms, there is a vast difference between various Side A policies available in today’s market, and some of the common notions regarding how to structure a traditional D&O insurance program do not apply to structuring a Side A D&O insurance program.

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