Also commonly referred to as an Individual D&O Policy, the Side A Coverage protects only the Directors and Officers rather than also providing coverages and benefits to the corporation. The coverage is exceptionally broad as it often contains few exclusions and many advantages to the D&Os.
Side A Coverage can also apply excess of the limits provided by the corporate policy, but will drop to pay first dollar and defense costs when no coverage is available through the corporate policy or if the corporate policy is held up in litigation.
There are many other benefits to having a Side A insurance policy in place. Take a look at some of the other reasons why directors and officers can benefit from this policy:
Limit Dilution
The limits of liability under the policy are available to fund only non-indemnifiable loss incurred by the Directors and Officers. In contrast, the limits of liability under a traditional corporate policy are also available to fund indemnifiable loss and corporate losses in a securities claim.
Directors and Officers can lose their personal protection under the corporate policy if the corporation incurs significant covered losses. That risk does not exist under Side A Policy.
Excess Coverage
The policy increases the coverage limits available to D&Os by providing coverage in excess over the corporate policy limit.
Difference in Conditions Coverage
The policy “drops down” to provide primary coverage on a difference in conditions basis. This means that the broad coverage will apply under certain circumstances where coverage is excluded or denied under the corporate policy.
Bankruptcy Protection
Corporate policies may be considered an asset of the bankrupt corporation. The Side A policy is intended to protect the D&Os only and will not be subject to an automatic stay under Bankruptcy Law.
Exclusions
The policy contains very few exclusions, some policies only exclude fraud and personal profit with final adjudication language.
Failure of Underlying Coverage
The policy will respond in the event of a failure of the primary policy to indemnify. This includes a wrongful refusal to indemnify and the failure of the insurer to indemnify due to bankruptcy. Coverage will usually apply within 60 days of a request for indemnification.
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It is recommended that the Side A policy be provided by an insurer who is not the primary carrier on the corporate policy. This list is also not exhaustive and there are a variety of other insurance coverages that Directors and Officers of mining companies need in order to address all the risks they face and prevent losses.
Download our free guidebook “Directors' and Officers' Liability Insurance Guide” here to find out how you can protect your company’s assets:
