Like all types of insurance, D&O has its own specific terminology. Here are some key terms used in regards to D&O liability exposure.

Allocation:  The step in which it is determined which percentage of loss is covered between the directors & officers and the firm itself. This step also spells out how much of the defense fees are advanced and, if a settlement is reached or a judgment entered, how much of that settlement or judgment is covered.

Claims-made Policy: 
Policy coverage starts for claims made during the life of the policy.

Continuity Date:
  The last instance in which a company signs a warranty.

Derivative Suit: 
Legal action initiated by a shareholder (on the company’s behalf) against the company’s D&Os, claiming that the D&Os breached their fiduciary duty.

An option, afforded to assureds, allowing for the extension of premiums. If the assured chooses discovery (typically 12 months from cancellation of policy), the company can turn in claims made against the D&Os for alleged wrongful acts said to have been committed before the cancellation date.

Duty to Defend: 
The insurer is required to assume and appoint an attorney to defend against a claim covered by the policy.

Entity Coverage: 
All claims covered in the D&O policy will extend to the company.

Retroactive Date: 
(aka “Retro Date” or “Prior Acts Exclusion”) The cut-off date used to determine which claims are covered under the policy. Claims stemming from wrongful acts completed before the cut-off date, or “Retroactive Date,” would not be covered under the policy.

When a company undergoes a change in ownership or experiences a significant shift in stockholder percentage, the ongoing acts coverage portion of the policy is no longer in effect for the rest of the life of the policy.

About Dumont Insurance Corp.

Dumont Insurance Brokers Corp. – renowned for the cumulative industry knowledge, experience and insight of its staff, its close attention to customer care, and its innovative, automation-tinged model – was developed with a unique system underwritten by the most trusted and highest-rated carriers. This unique equation allows Dumont to provide customers with the very best, and most cost-effective, professional liability and E&O coverage, in spite of the ever-increasing hazards of a litigious society.


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