What is Directors and officers liability insurance?
The insurance is closely related to corporate governance, corporations law, and the fiduciary duty owed to shareholders or other beneficiaries. Under the United States business judgment rule, the directors and officers are granted broad discretion in their business activities.
In the United States, corporate law is typically at the state level; corporations are often domiciled in Delaware (with one estimate at 97% of corporations domiciled in either their home state or Delaware, due to its developed corporate law and tax benefits;.Publicly traded companies are subject to more federal claims, particularly due to the Securities Act of 1933 and the Securities Exchange Act of 1934.
Directors and officers liability insurance Coverages
Under the "traditional" D&O policy applied to "public companies" (those having securities trading under national securities exchanges etc.), there are three insuring clauses. These insuring clauses are termed: Side-A or "non-indemnified"; Side-B; or "indemnified"; and Side-C; "entity securities coverage". D&O policies may also provide an additional Side-D clause, which provides for a sublimit for investigative costs coverage related to a shareholder derivative demand. In detail, the coverage clauses provide the following:
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