Side A and Side B Cover of D&O Insurance Explained

In this fast-growing world of careers, people love to take the challenge of diversifying their professional skills. For this reason, you can easily find senior executives and board members switching roles from one company to the other. 

If you are on the board of your organization, you can be held liable for defense costs resulting from claims filed against you. Similarly, this can happen to other board members or senior officers in your company. 

In all such cases, there’s one thing that covers directors against a substantial financial hit – a Directors and Officers liability insurance policy in India.

Buying the most suitable D&O insurance policy is not an easy task. You need to know its terms well, to ensure that you get the insurance benefits you expect. Plus, there is no one-size-fits-all policy that you can buy. This is where a good insurance broker plays a vital role.

Two terms related to D&O insurance that you might have heard are – Side A and Side B Cover. 

But do you know what they refer to? 

Being aware of these terms will help you buy the right policy for your business. So, let’s dig deeper to find out more about them.

What is Side A Cover of a D&O Insurance Policy?

Before moving to its definition, consider this example –

A shareholder in a company files a lawsuit against one of its directors, saying he has misused his power to cause losses. Now, the accused director has looked to the company for indemnification. 

In such a situation, what if the company says it can’t help the director because it is bankrupt? 

Side A cover of the D&O policy in India caters to such situations. It responds when the company is unable to indemnify its directors and other senior executives directly. It is also known as the ‘personal protection cover’ section of Directors and Officers liability insurance in India. 

As shared above, a company’s bankruptcy is just one example where Side A cover comes into use. In another situation, a company could be prohibited by law to indemnify its directors. 

Using Side A cover, directors, and officers can directly connect with the insurer for indemnification without involving the company. Typically, this cover has Nil Excess, which means the insurer agrees to waive the deductible in the event of a claim. Hence the SIde A cover is an important aspect of a good D&O policy.

What is Side B Cover?

Most organizations buy a D&O policy to indemnify their insured directors and officers against personal liabilities. An added advantage of purchasing this policy is that it attracts new talent to the company, which can boost its growth. 

Side B cover is that part of the Directors and Officers liability insurance in India, which reimburses a company when it indemnifies its directors in case of a lawsuit. This cover is mostly active during the majority of D&O claims. It is also known as ‘Corporate Reimbursement Coverage.’

Key Exclusions in a D&O Policy

Along with knowing about the Side A and Side B cover, you should know what it does not cover in some particular situations. Two of the key exclusions of a D&O policy are:

 

  • Intentional Misconduct

 

It refers to the willful neglect or misconduct by the directors while holding their position in a company. If the accused is found guilty as per the investigation, the insurance company will not offer the benefits expected. 

 

  • One Director Accusing the Other

 

In certain situations, one director of a company files a lawsuit against the other or the senior officers. It becomes the case of ‘insured vs insured’, where D & O liability insurance in India does not provide cover.

As in the case of any other insurance product, you should have enough knowledge about selecting the best D&O policy for yourself, before buying one. SecureNow, a renowned insurance broker in India, can help you buy the ideal D&O policy for your business. 

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