As corporate policyholders prepare for another round of directors’ and officers’ (D&O) insurance renewals in a COVID-19 environment, a hardened D&O market, and a difficult economic climate, here are five tips to consider:
- Bankruptcy. Have a D&O policy that can provide protections if the company becomes insolvent or enters bankruptcy. To that end, ensure the policy does not have bankruptcy- or creditor-specific exclusions, can respond to creditor committee claims, and does not treat a bankruptcy as a change-in-control event.
- Sticker Shock. The hardening D&O insurance market that began before the pandemic continues. Be prepared for increased premiums and retentions and reduced capacity. Consider having your broker market your company’s D&O program to compare terms.
- Narrow Exclusions. Narrowing exclusions should be a goal during any renewal, but in a COVID-19 world, focus on narrowing the “bodily injury” and “pollution” exclusions to try to maximize coverage for any COVID-19-related claims.
- Investigation Coverage. As the government conducts investigations into companies that secured PPP loans, CARES Act grants, or other government benefits, companies should ensure their D&O policies provide government/regulatory investigation coverage.
- Notice of Circumstances. If the terms and conditions of the renewal D&O policy are more restrictive than the expiring policy, consider providing a notice under the expiring policy of any potential claims to lock in the more favorable coverage.
