Insureds moving to protect their directors and officers.More companies are purchasing stand-alone (jargon) stand-alone - Capable of operating without other programs, libraries, computers, hardware, networks, etc. Exactly what is absent is presumed to be obvious from context. "We only run Windows on stand-alone PCs because it's too dangerous to run it on networked ones." directors and officers coverage, instead of a more comprehensive package that also can be used to protect the company's assets, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a new survey by Willis Wil·lis , Thomas 1621-1675. English anatomist and physician known for his studies of the nervous system and the brain. He discovered the circle of Willis at the base of the brain. . One factor driving this change is the need to protect directors and officers from "derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. claims," which are lawsuits brought by shareholders and investors seeking to compel Compel - COMpute ParallEL directors and officers to repay money to the company, said Ann ANN, Scotch law. Half a year's stipend over and above what is owing for the incumbency due to a minister's relict, or child, or next of kin, after his decease. Wishaw. Also, an abbreviation of annus, year; also of annates. In the old law French writers, ann or rather an, signifies a year. Longmore, senior vice president and D&O product leader for Willis. "Today, if you talk to key players in the plaintiffs bar, they'll tell you every securities claim has a 'chaser'--a derivative claim--that seeks to return money to the company," Longmore said. "If a company indemnifies their officers, they say 'I forgive the risk.' But companies cannot always indemnify To compensate for loss or damage; to provide security for financial reimbursement to an individual in case of a specified loss incurred by the person. Insurance companies indemnify their policyholders against damage caused by such things as fire, theft, and flooding, which their officers." For instance, she said a company cannot protect its officers if they are sued for illegal personal profiting or misappropriation misappropriation n. the intentional, illegal use of the property or funds of another person for one's own use or other unauthorized purpose, particularly by a public official, a trustee of a trust, an executor or administrator of a dead person's estate, or by any of funds. Known as "Side A" coverage, this type of D&O coverage used to be purchased on an excess basis, over a broader coverage that typically covered both the individuals and the company. "Side A" covers only the directors and officers of the company where the company cannot indemnify them, and protects the personal assets of the executives. "Side B" coverage covers only the directors and officers, where the company otherwise could or would have to indemnify them. This protects the company's balance sheet. "Side C" covers the company itself--for public companies, this is for claims related to securities. This provides additional protection for the company's balance sheet, as otherwise the company's assets would be exposed. Two very different types of companies are buying just the Side A coverage, Longmore said. On one hand are companies that can't afford to buy a complete package of D&O coverage, because they are already in trouble--are under investigation or have a bad claims history. On the other hand are solid companies that could buy any type of D&O coverage, but choose instead to only buy the Side A coverage and self-insure the rest. Willis surveyed about 300 of the top Fortune 1,000 companies, and found the total average amount of stand-alone Side A coverage was $57 million, with the median at $52 million. For both the troubled companies and the solid ones, the minimum purchased was $40 million and the maximum was $200 million. While stand-alone Side A coverage is becoming more common, most Side A coverage is still purchased on an excess base over the broader base of coverage that includes Side B and Side C. These combination programs had Side A coverage attaching as low as $10 million and as high as $200 million. About 87% of those who purchased Side A coverage did so as part of a combination program, Willis said. Loss/Risk Management Notes is compiled by Senior Associate Editor Meg Green. |
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