Difference in condition (DIC) insurance: An endorsement to an policy that fills the gaps between a policy provided by the corporation and the director’s policy. A DIC endorsement typically states that, to the extent a loss is not covered under the corporation-provided policy, it would be covered under the director’s policy on an excess basis.
ADDITIONAL STORIES IN THE DIRECTOR’S GUIDE TO LIABILITY:
Risks Rising
Litigation 101: You’ve Been Sued. Now What?
The Ultimate Insurance Check List
Avoiding the “F” Word: How Your External Auditor Can Help You Avoid Fraud
Nose coverage: Claims-made liability policies typically include a retroactive date, and the policy will not cover claims arising from covered occurrences, acts, or omissions committed prior to that date. The period between the inception date and retroactive date. It gets its name from its attachment to the “front” of the policy term, as opposed to its “tail.”
Policyholder surplus: The difference between an insurer’s admitted assets and liabilities, i.e., its net worth. This figure is used in determining the insurer’s financial strength and capacity.
Reservation of rights: An insurer’s notification to an insured that coverage for a claim may not apply. Such notification allows an insurer to investigate (or even defend) a claim to determine if coverage applies (in whole or in part) without waiving its right to later deny coverage based on information revealed by the investigation. Although a reservation of rights protects an insurer’s interests, it also alerts an insured to the fact that some elements of a claim may not be covered, thereby allowing the insured to take necessary steps to protect its potentially uninsured interests.
Runoff: A provision in a reinsurance contract stating that the reinsurer remains liable for losses under reinsured policies in force on the termination date, that result from occurrences taking place after the termination date.
Severability of exclusions: A term stating that although an exclusion applies to one (or more) insured(s) under a policy, the exclusion does not necessarily apply, and therefore bar coverage, as respects other insureds. Assume that a directors & officers liability policy excluding coverage for fraudulent and criminal acts also contains a severability provision that applies to the policy’s exclusions. Under these circumstances, the fraudulent actions of one director would not bar coverage for other directors who were not a party to these fraudulent acts (that bar coverage for the director who committed them).
Several liability: Liability that may be assigned or apportioned separately to each of a number of liable parties. Distinguishable from, but often paired with, joint liability.
Side A coverage: The section of coverage under a directors and officers liability insurance policy affording “direct” coverage of an organization’s directors and officers. This portion of the policy provides direct indemnification to the directors and officers for acts that the corporate organization is not legally required to indemnify the directors and officers.
Side A ONLY coverage: A directors and offices liability policy that provides only “direct” coverage of the directors and officers, but does not cover the corporation’s legal obligation to indemnify the directors and officers. Side A-only forms are written on either an excess or umbrella basis over a primary D&O policy. When written on an excess basis, they provide additional limits if a claim exhausts the coverage available under the primary form. When written on an umbrella basis, Side A-only policies afford broader coverage than the underlying, primary D&O policy, as well as additional limits.
Side B coverage: Another term for what is known as the “Corporate Reimbursement Coverage” section of a directors and officers liability policy.
Side C coverage: Another term for what is known as the “Entity Securities Coverage” section of a directors and officers liability policy.
Tail: Claims from workers compensation and liability exposures in a given period can arise for many years thereafter. The aggregate of such incurred but not reported (IBNR) losses is often called tail liability.
Tail coverage: A claims-made liability policy covers claims made prior to the policy’s expiration or cancellation that arise from covered occurrences, acts, or omissions committed on or after their retroactive date, if any.
Source: International Risk Management Association (www.irmi.com)