Think dual coverage.

• Author: WEISS, STEPHEN J.

For directors and officers, a D&O policy often is not enough. Other exposures threaten.

WHATS IN A NAME? Far too much if it will lock you into narrow thinking.

As a director or officer, you know that you should have D&O liability insurance. After all, this policy has your name -- or at least your title -- written all over it. But be careful: If you focus solely on D&O coverage, you will overlook another form of insurance vital to protecting your personal assets -- employment practices liability insurance (EPLI).

EPLI can protect you against many employment-based liabilities, such as sexual harassment and discrimination, that are not covered by D&O policies. The right EPLI policy may mitigate other exposures as well.

D&O Insurance Shortfalls in the Employment Practices Liability Area. There are several reasons why D&O insurance policies do not protect you and your company against many workplace claims:

* First, improper conduct like sexual harassment typically is not within the scope of the policy's insuring agreement. In harassment cases, for example, the insurance company can assert that the insured is not protected because the wrongful conduct did not arise out of acts taken in his or her capacity as a director or officer of the company.

* Second, policy exclusions may preclude coverage.

* Third, even if an individual is protected, the company is not because entity coverage typically is limited to securities claims.

Different Forms of EPLI Coverage. Seeking competitive advantage, many insurers have simply added EPLI to their D&O policies by endorsement. The typical EPLI endorsement provides very limited coverage for workplace claims.

Sharing a policy limit means that both employment practices claims and traditional D&O claims draw on a single pool of insurance dollars. Thus, a claim arising out of some particularly offensive and pervasive unlawful employment practices can result in a costly judgment or settlement that erodes, or even exhausts, the policy limit on which you were relying to cover D&O exposures. You pay little or nothing for an EPLI endorsement and you get about what you pay for.

Combination D&O/EPLI policies provide broader EPLI coverage than a D&O policy with an EPLI endorsement. Even so, the combination policy still falls short of providing top protection because generally it, too, has a shared policy limit. The broadest protection for employment practices liabilities comes in the form of a standalone EPLI policy.

The...