Common use of INSURING AGREEMENTS Clause in Contracts

INSURING AGREEMENTS. SIDE A EXCESS DIFFERENCE-IN-CONDITIONS (DIC)—Unlike standard Side A agreements, Side A DIC sits on top of a traditional D&O policy, effectively providing a broader coverage with separate limits for directors and officers. This fills the following gaps: • Side A DIC coverage provides excess insurance that kicks in once a company’s traditional D&O policy is exhausted. • Side A DIC coverage provides protection when an underlying insurer fails or refuses to pay, attempts to rescind coverage or becomes insolvent. • Side A DIC coverage is not typically subject to the exclusions found in traditional D&O policies, specifically the “insured versus insured” and “pollution” exclusions. This can create policies that are more dynamic. INSURING AGREEMENTS: SIDE B—Side B, also known as corporate reimbursement coverage, is the second insuring agreement of a D&O policy. Side B reimburses organizations for expenses they incur when defending directors and officers in accordance with their indemnification obligations. INSURING AGREEMENTS: SIDE C—Often, organizations are named in lawsuits alongside their directors and officers, leaving the entity exposed to serious legal action. Side C coverage, sometimes referred to as entity coverage, is the third insuring agreement of a D&O policy. This side insures organizations for claims made directly against the organization by providing entity asset protections and coverage for defense costs. LIMIT OF LIABILITY—Put simply, the limit of liability sets the maximum amount that an insurance company is prepared to spend defending and settling claims on behalf of a business and its management. A limit of liability is available for the payment of legal defense costs, settlements and court awarded judgments throughout a policy period. LOSS—Loss specifies the claim costs covered by a policy. Specifically, loss in D&O policies refers to expenses— investigation costs, legal fees and settlements—faced by defendants involved in litigation. Losses can also include court awarded judgments, like damages, civil fines and penalties.