A top goal for 2020 is to review and negotiate your directors and officers (D&O) (and other) insurance policies to make sure they are as favorable as possible from a coverage and pricing perspective. (See Make a few small yet substantial plans: five steps to managing directors’ and officers’ liability insurance and other risks in 2020.) Enhancing policy terms and conditions puts the company and its directors, officers, and employees in the best position to maximize recovery if and when a claim hits. Keep in mind the five steps below to claim-handling success.
- Determine if a claim or potential claim exists. Remember that D&O policies contain broad definitions of a claim, which can range from a demand letter or lawsuit to a request to toll a statute of limitations. Some policies will also consider investigations to be claims, especially when made against directors and officers. Even if a matter does not amount to a claim under the policy definition, it may be a potential claim.
- Give timely notice under the primary and excess policies and consider other potentially applicable types of coverage. D&O (and other policies) typically have notice requirements – whether “as soon as practicable” after a claim is made or within a set time period such as 30 or 60 days.
- Secure consent to defense arrangements. Most D&O policies provide that the insured controls the defense but that the insurer must consent to the defense arrangements.
- Keep insurers in the loop and obtain consent to settlements. The duty of cooperation and the right of association embedded in most D&O policies typically provide that the insureds must cooperate with the carriers’ reasonable requests for information, that the carriers have the right to associate in the defense and settlement of claims, and that consent to settlement is required but cannot be unreasonably withheld.
- Know your coverage dispute resolution options. Carriers may deny coverage or reserve their rights to challenge coverage based on policy terms and exclusions or differing views on settlement value.
Members of our Insurance Recovery Group provide more information on these five steps in our recent client alert.