Stephannie Ciantro, Claims Manager, explains how to protect the board of directors with a D&O policy.
By nature of their positions, board members are open to a number of liability risks, and it is the D&O Policy which addresses the majority of these risks. Some of the allegations that the D&O Policy would address include breach of contract, breach of warranty of habitability, and breach of fiduciary duty.
The D&O Policy is a Claims-Made Policy, in comparison to Property, General Liability, and Package Policies, which are typically occurrence based. This means that claims are handled by the D&O policy in force at the time the claim is made, rather than when it occurs. Because of this, all claims must be reported in a timely manner.
As soon as there is any hint that a board-related issue may surface, the carrier needs to be put on notice—as it will be that seemingly miniscule event, conversation, text message, or email which will be considered the first notice of the claim to the insured. This cannot be stressed enough, as the carrier has every right to deny the claim for late reporting. This happens more often than you might think, and sometimes results in board members being left with no coverage.
One of the reasons that Board members might try to avoid filing such a claim is because they are worried about the effect of a claim on the loss runs. It is important to remember that any potential impact of a claim on the loss runs pales in comparison to the potential impact of failing to report the claim in a timely manner.
For more information, please contact us.