Individual Accountability Highlights Insurance Issues for Directors, Officers
The New York Law Journal (subscription required) featured an article authored by Litigation partner Jeremy King entitled “Individual Accountability Highlights Insurance Issues for Directors, Officers.” The article notes the new policy set forth by the U.S. Department of Justice and how it may significantly increase the risk of personal liability for directors and officers based upon alleged corporate misconduct. Directors and officers should focus on the scope of the insurance purchased to protect their individual interests, as well as the company's interests, due to the shift in the DOJ policy. It benefits directors and officers to ensure that the directors' and officers' insurance policy (D&O insurance) purchased by the company is sufficiently broad to provide coverage for their individual interests and the risks to which they are exposed because of the leadership position they have assumed at their company. Jeremy outlines provisions of D&O insurance that should be addressed: protecting individuals; containing a severability provision; noting a clause on providing instruction as to how the insurance company will make payments under the policy if it appears that the policy's limits will not meet all of the covered costs being incurred; consideration of securing additional coverage; allocation of defense costs distinguishing between covered and uncovered claims; and including terms to confirm that standard clauses convey the protection that is needed in light of the new mandates.