Why it matters for your company
Side B is the part that pays most often in a healthy company, because the company indemnifies its leaders and the policy reimburses it. Side A matters when the company is insolvent or legally barred from indemnifying, and it is the part board members care about most.
In a private company D&O form, Side C usually covers the entity for a much wider range of claims than in a public company form. All three sides usually share one limit, so a large entity claim can consume the money individuals were relying on, which is why some boards add a separate Side A policy.
Related terms
- Directors and officers insurance (D&O)Management liability that protects directors, officers and the company when leadership is sued over decisions made running the business. Term sheets often make it a closing condition at the first priced round.
- Retention and deductibleThe amount of a claim you pay yourself. With a deductible the insurer handles the claim and bills you back; with a self-insured retention you pay defense and loss up to the amount before the insurer steps in.
- Claims-made and occurrence policiesAn occurrence policy responds to incidents that happen during the policy period, whenever the claim is filed. A claims-made policy responds to claims first made during the policy period, subject to its retroactive date.