Chapter D&O Coverage

1. Chapter D&O Coverage Daniel R. Nash, CPCU Vice President MARSH ASHRM Chapter Workshop 2005

2. Chapter D&O Who is typically insured? • Directors, Officers • Employees of the Company may also be included

3. Chapter D&O What are they insured for? • For “Claims” for Wrongful Acts” • Definition of wrongful act: Any actual breach of duty, neglect, error, misstatement, misleading statement, omission or act by the Directors or Officers ( or employees, or the company) in their capacity as such, or any matter claimed against them solely by reason of the status as Directors or Officers (or employees) of the Company

4. Chapter D&O What are they insured for? (Cont.) • Employment Practices Wrongful Act may include: Any actual or alleged: • Wrongful dismissal • Harassment • Discrimination • Retaliation • Employment related: libel, slander, etc. • Wrongful failure to employ or promote

5. Chapter D&O How is policy triggered? • Typically, a written demand for damages or a proceeding (with greater latitude for employment-related matters) made against an individual insured or the Company

6. Chapter D&O What does “Loss” include? • Defense costs, settlements, judgments

7. Chapter D&O What is typically excluded? • Prior or pending litigation • Bodily Injury/Property damage (except for employment-related personal injury allegations) • Pollution Liability • Breach of Contract • ERISA Liability

8. Chapter D&O What is typically excluded? (Cont.) • Insured vs. Insured suits • Various EPL related exclusions • Dishonesty and fraud • Fines, penalties, taxes • Punitive Damages

9. Chapter D&O Coverage term • Pay on Behalf Of • Duty to Defend

10. Chapter D&O Policy Construction • Three Coverage Parts • Coverage Part “A” • D’s & O’s liability for non-indemnifiable loss • Usually no retention • Direct coverage to D’s and O’s

11. Chapter D&O Policy Construction (Cont.) • Coverage Part “B” • D’s & O’s liability for indemnifiable loss • Corporate reimbursement retention applies • Coverage for corporation’s indemnification of D’s & O’s for their liability

12. Chapter D&O Policy Construction (Cont.) • Coverage Part “C” • Entity coverage • Usually for securities claims only • Securities claim or entity liability retention applies

13. Chapter D&O Potential Sources of Claims • Competitors (unfair business practices, i.e. NPSF, CPSF) • Debts • Employee benefits • Management of funds • Unfair treatment for selected speakers

14. Chapter D&O Potential Sources of Claims (Cont.) • Harassment • Failure to promote* *These claims can come from current employees or 3rd parties applying for job and doesn’t get it.

15. Chapter D&O How much does D & O cost? Of course it depends on the type of coverage you buy, i.e. D&O with EPL or simply stand alone D&O. A number of other factors including the assets of your chapter, the limits you purchase and the number of employees will impact the cost of this coverage.

16. Chapter D&O Why should you buy D & O? If you don’t buy it, your personal assets and net worth are at risk. This is a general discussion of D & O coverage. Consult with an insurance broker to discuss how a D&O policy would affect you, fellow board members and the entity.