The list of bank and financial challenges, from insolvency to acquisition, continues to dominate the headlines. There are practical, proactive steps to take now on the insurance front.
If not facing a claim (yet):
- Review your directors’ and officers’ liability (D&O) insurance, errors and omissions insurance, bankers professional liability (BPL), fidelity bond, and cyber coverage.
On the D&O front:
- Determine whether there is separate “Side A” coverage for non-indemnifiable claims made against insured persons.
- When analyzing “full side” coverage, key provisions include what constitutes a claim, whether there is coverage for employees as well as directors and officers, whether there is coverage for subpoenas and investigations (for individuals and the entity), timing for providing notice, and various exclusions.
- The “insured v. insured” exclusion should contain an exception for claims by a trustee or receiver, among other exceptions.
- The “fraud” or “illegal profit” exclusions should be narrowly drafted to apply only in the event of a final adjudication in the underlying action.
- There should be a “priority of payments” provision and an “automatic stay in bankruptcy” provision so that, in the event of competing claims, non-indemnifiable claims against directors and officers may be paid first. And, in the event of insolvency, the coverage can be tapped for such claims.