Expanded D&O coverage featured in Chubb policy.

The personal assets of directors and officers can be covered by a policy from Chubb Group of Insurance Cos. when their company is unable, unwilling or legally prohibited from funding indemnification.

Chubb's D&O Elite is a nonrescindable and noncancelable policy that offers directors and officers a dedicated limit of liability that is not shared with the corporate entity. By contrast, traditional D&O policies offer an aggregate limit that is often shared between the directors and officers and the company.

This coverage comes at a time when corporate scandals, financial restatements and bankruptcies have created a litigious D&O liability environment and financial uncertainty. In some cases, the financial losses of shareholders exceed the limits of D&O liability insurance, exposing directors and officers and their personal assets to litigation.

"Corporate board members are worried about losing their homes and savings if their companies' directors and officers insurance fails to protect them from lawsuits," said Anthony S. Galban, a vice president of Chubb & Son and directors and officers liability insurance underwriting manager for Chubb.

Highlights of Chubb's D&O Elite include:

* Nonrescindable--Even when misrepresentations are made in the application, Chubb will not rescind coverage to insured individuals who did not know the facts that were not truthfully and accurately disclosed;

* Noncancelable--The policy will not be canceled by Chubb as long as the premium is paid;

* Fully severable--Knowledge possessed by one board member cannot be imputed to another;

* Comprehensive coverage--No exclusions for pollution, errors and omissions, failure to maintain insurance or libel/slander or defamation;

* Choice of defense counsel--Policy allows the insured individuals to choose defense counsel; and

* Spousal/domestic partner and estates coverage--Protection for executives, their spouses or domestic partners and heirs or estates if they are named as co-defendants.

Trends in corporate governance are also fueling the need for this coverage, Galban said. The 2002 passage of the Sarbanes-Oxley Act dramatically increased the level of responsibility and accountability for directors of public companies, especially those serving on audit committees.

D&O policy limits for bankrupt companies are being seized as an asset by a debtor's bankruptcy estate and, therefore, are not available to help protect individual directors and officers. Also, policies are being increasingly rescinded by insurers who argue that they have been defrauded by the officers signing the insurance applications for coverage, thereby leaving some directors and officers potentially uninsured.

A recent study by Korn/Ferry International and Corporate Board Member magazine showed that nearly half of the 908 board members surveyed were concerned about their D&O liability coverage. According to the study, 48% said they have turned down a board position because they felt the risk of being sued was too great. And 49% said D&O insurance was a very important factor in their decision to join particular boards.