What
does the BAM D&O Section cover?
Actual or
alleged error, omission, misleading statement, neglect,
breach of duty or act. |
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What
doesn't the D&O cover?
In general,
the policies exclusions can be divided into four
categories: Uninsurable such as insider trading;
Other insurance such as dishonesty; Beyond industry's
capacity such as nuclear, and; Underwriting judgement
which includes items such as one insured suing another
and litigation started prior to the policy inception. |
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| Who
would bring a claim?
Shareholders,
competitors, venders, clients, creditors, governmental
agencies, owners of acquired businesses. |
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Who
would they bring it against?
Directors and officers
including their estates, heir, legal representatives
and spouses as well as the corporation itself. |
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If
this is a Directors' & Officers' policy, why
do I need coverage for the company?
Most D&O policies
do not cover the corporation. Yet about 85% of claims
name the corporation. In those cases, the insurance
company on average pays only about 65% of the claim.
With BAM the problem disappears. |
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Why
would they sue me?
| 1. |
Shareholders because
they feel the directors and or officers diminished
the value of the company and therefore their
holdings. |
| 2. |
Competitors because
they feel your firm competed unfairly. See
'Why Do I Need D&O Coverage'. |
| 3. |
Venders because
they are dissatisfied with the agreement between
your two firms. See 'Why Do I Need D&O
Coverage'. |
| 4. |
Similar to the type
claims venders might bring. |
| 5. |
Creditors because
they feel the directors and officers did not
properly protect the assets of the company. |
| 6. |
Governmental agencies
for violation of regulatory procedures. |
| 7. |
Acquired business because the
owners feel they received insufficient value.
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How
much can they get?
Average payment
on closed paid claims was $8.67 million according
to the 1999 D&O Liability Survey prepared by
Tillinghast-Towers Perrin. |
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What
will the policy pay for?
| 1. |
Judgement or settlement; |
| 2. |
Defense; |
| 3. |
Punitive Damages
where insurable |
|
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How
much will it pay?
Up to the coverage
amount purchased including defense costs for the
entire policy period regardless of the number of
claims. |
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How
does the retention work?
| 1. |
There is no retention
if the corporation is not permitted to indemnify
the directors and officers for a claim. |
| 2. |
If the policy does
permit the corporation to indemnify the individuals,
the policy will pay up to the limit of liability
in excess of the retention amount. |
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For
example, a $1 million policy with a $5,000
retention will pay up to $1 million excess
of the first $5,000 of loss. You will pay
the first $5,000 of any claim. |
|
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How
does my retention compare to other Insureds?
Most D&O policies
have at least a $25,000 retention. BAM retentions
are lower and sometimes even non-existent if EPL
is also purchased. |
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The
insurance company has to defend me. Right?
If the policy is
a duty to defend basis. If not, you must make arrangements
to find an attorney and manage the litigation yourself.
BAM is a duty to defend policy. |
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Ok,
but I have an excellent attorney
You are
free to use them if you choose as long as you get
the consent of the insurance company first. They
will want to make sure the attorney is qualified
to handle such matters. |
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What
happens if several of us are sued, but only one
of us was dishonest.
Would we all be excluded?
No, only the guilty
party. There is severability of all exclusions which
means only the guilty party is excluded. |
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Ok,
but what if we are accused of being dishonest and
none of us are? Are we still excluded?
No. BAM will cover
you up until the point you are found to be guilty
in a court. |
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Is
there coverage if I have an offering of stock?
Yes as long as
it is a Private offering and does not exceed $50
million. If you plan a Public Offering, please advise
us as soon as possible so we can make arrangements
to cover it. |
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What
if we acquire another company?
It is automatically
covered unlike most other policies which have an
asset size test. |
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What
is the 'hammer' clause and what is so bad about
it?
If the insurance
company wants to settle a claim that you feel would
be an admission of guilt and prefer continuing to
fight instead, the underwriter can exercise its
'hammer' requiring you to pay any amounts in excess
of the proposed settlement. BAM has no such clause. |
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When
should I report a claim?
Magine a policy
expiring on 1/1 and receiving a claim on 12/31.
Many policies require that you report it before
that policy expires. In other words, New Year's
Eve. BAM allows you up to 60 days after policy expiration.
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