The list of banking and financial challenges, from bankruptcy to acquisitions, continues to dominate the headlines. There are practical and proactive steps to be taken now on the insurance front.
If not facing claims (yet):
- Review directors and officers liability (D&O), fault and negligence insurance, banker’s professional responsibility (BPL), loyalty bonds, and cyber protection.
In front of the D&O:
- Determine if there is separate “Side A” coverage for non-recoverable claims made against insured persons.
- When analyzing “full side” coverage, key provisions include what constitutes a claim, whether there is coverage for employees as well as directors and officers, whether there is coverage for subpoenas and investigations (for both individuals and entities), time to give notice, and various exceptions.
- The “insured v. insured” exception should contain an exception for claims by trustees or beneficiaries, among other exceptions.
- The “fraud” or “illegal gain” exception must be narrowly designed to apply only in the event of a final decision in the underlying act.
- There must be a “pay priority” provision and an “automatically remain in bankruptcy” provision so that, in the case of competing claims, non-refundable claims against directors and officers can be paid first. And, in the event of bankruptcy, coverage can be tapped for the claim.
If facing a claim or potential claim or investigation:
- Provide timely notification to all operators on towers and across programs of potentially relevant coverage.
- Get approval for defense arrangements immediately.
- Review scope for derivatives investigations and crisis management. Many D&O policies have no-reduced sub-limits for such situations.
- Be aware that you may not have attorney-client privilege with your insurance broker or insurance company. Nondisclosure agreements are helpful but not airtight.
- Review the terms of “cooperation” and “association” in the policy so that you communicate regularly with the operator.
- Obtain “consent” if required to settle or, if required, to make an offer to engage in settlement negotiations.
- Review “dispute resolution” provisions, choice of law, and any jurisdictional or venue issues, particularly where large insurance towers come into play.
- Consult a knowledgeable insurance coverage advisor to help maximize coverage.
Client Alert 2023-078