Directors And Officers Liability Insurance: A Director's Guide.

AuthorBAILEY, DAN
PositionBrief Article - Review

by Ty R. Sagalow

Published by the National Association of Corporate Directors, Washington D.C., 267 pages, $165.00

FROM THE PERSPECTIVE of board members and officers, the most important insurance policy maintained by a company is the directors and officers (D&O) policy. In several situations, a company can be legally or financially unable to indemnify its directors and officers. Absent quality D&O insurance, the personal assets of the directors and officers then will be the only source to pay potentially enormous defense costs, settlements and judgments.

Although most directors and officers acknowledge their strong reliance on D&O insurance, until recently few written resources were available to assist directors, officers, and their advisers in evaluating and negotiating quality D&O insurance coverage. To help fill that void, the National Association of Corporate Directors has published Directors and Officers Liability Insurance: A Director's Guide as part of its Directors Handbook series. The Guide is authored by Ty R. Sagalow, a senior executive with American International Group Inc. who at the time of the book's writing was senior vice president and chief underwriting officer of National Union Fire Insurance Co. of Pittsburgh, Pa., a subsidiary of AIG that is one of the largest underwriters of D&O insurance in the world. As principal architect of several creative D&O policy forms issued by National Union, the author brings a practical, "real world" perspective to the discussion of D&O insurance policy terms.

The Guide provides a helpful overview of many of the more important features of the D&O insurance policy and discusses a number of provisions which a company's risk manager should consider when negotiating its policy. Because each insurer utilizes its own unique D&O policy form and many of the policy provisions are negotiable, this type of handbook can be quite helpful in evaluating and purchasing quality D&O insurance coverage.

The book includes several particularly helpful features. First, the author discusses in one of the main sections the seven crucial coverage questions which are most likely to arise in a claims context, and identifies standard policy form variations which either create or minimize the potential for disappointing or questionable coverage in each area. These seven questions -- such as "What Is a Claim and When Must It Be Made?" and "What Is a 'Wrongful Act'" -- can serve as a useful road map in evaluating the...

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