Entity Plus Coverage Introduction for Directors & Officers Liability – ABC Cover
Agenda • Current inquiry and investigation coverage – and our solution • How the coverage works • Examples of the co-insurance in practice • Notification and policy periods • Recap of what is in the endorsement • Q&A All examples here are merely illustrative and coverage would be subject to full terms and conditions
Current investigations coverage and our offering Covered claims Covered claims against Entity against D&Os Indemnification? Yes No Entity as a Entity for SCA and defendant in SCA investigations – only trigger of SCA WHO? Corporate Entity D&Os being filed Corporate assets Corporate assets Corporate assets WHAT? Personal assets YES YES No YES INQUIRY? YES YES YES No INVESTIGATION SIDE A SIDE C SIDE “C+ ” SIDE B All examples here are merely illustrative and coverage would be subject to full terms and conditions
Entity investigation costs: how the coverage works Look back and look forward coverage co-insurance co-insurance SCA filed SCA resolved Entity Entity inquiry and inquiry and investigation investigation (formal and (formal and informal) informal) look back look forward coverage coverage costs No co-insurance applies for costs incurred after filing of SCA until SCA is resolved All examples here are merely illustrative and coverage would be subject to full terms and conditions
Co-insurance and payment example (current) 5m entity inquiry & investigation Policy limit costs incurred available after SCA for a resolved subsequent claim (or allocation ($16m) depending on 5m SCA facts of the settlement and case defence costs 5m entity inquiry & investigation costs incurred alongside SCA 5m entity Amount inquiry and Policy paid by the investigation limit paid: client costs pre SCA $4m ($16m) $1m SCA Liability Liability Liability retention settlement retained by retained by retained by and the entity the entity entity defence of $4m All examples here are merely illustrative and coverage would be subject to full terms and conditions
Co-insurance and payment example (with “C+” coverage) 5m entity inquiry Policy & investigation limit costs incurred remaining after SCA resolved 5m SCA Policy settlement and limit paid: defence costs $16.75m 5m entity inquiry & investigation costs incurred alongside SCA 5m entity inquiry and Amount investigation retained costs pre SCA by client: $3.25m 25% WE PAY: WE PAY: $1m WE PAY: WE PAY: 25% SCA retained by 75% retention 75% $5m for retained by company settlement coinsurance coinsurance concurrent entity ($1m) of $5m for costs ($3m) entity costs ($1.25m) (subject to incurred allocation) post SCA resolved ($3.75m) All examples here are merely illustrative and coverage would be subject to full terms and conditions
Further co-insurance examples - $15m policy with $1m SIR Scenario 1: Dismissal: Significant entity Scenario 2: Large SCA settlement: inquiry and informal & formal Significant entity inquiry and informal & investigation costs incurred prior to SCA formal investigation costs incurred prior filing ($10m). SCA dismissed prior to to SCA filing ($20m). SCA defence costs motion to dismiss with defence costs of of $30m, and settlement of $100m $1m We pay SCA defence costs Excess of $1m Excess tower pays tower pays remaining remaining $115m Client retains $129.25m loss 25% of $9m Client loss pays all we pay $11m 75% of $9m We pay We pay ($6.75 $0.75m $15m m of SCA policy limit costs in defence costs Client We pay $1m SIR retains Client 75% of $1m SIR $4.75m pays pre $19m SCA costs ($14.25m) Old With C+ of $20m structure coverage $1m SIR Old With C+ structure coverage All examples here are merely illustrative and coverage would be subject to full terms and conditions
Notification: how this works. Policy period where investigation is notified to insurers 2017 2018 2016 Entity endorsement first Entity investigation is noticed SCA filed. granted with coverage date of and accepted by insurers as a 2016 circumstance Entity investigation is commenced against company but not noticed to insurers (optional reporting) Claim sits in 2017 YOA for both Investigation costs and SCA NOTE: if investigation had been noticed to insurers at the point it was received in 2016, all coverage would sit in the 2016 policy All examples here are merely illustrative and coverage would be subject to full terms and conditions
Notification: how this works (cont/d) Policy period where investigation is not notified to insurers 2017 2018 2016 Entity endorsement first SCA filed. granted with coverage date of 2016 Entity investigation is commenced against company but not noticed to insurers Claim sits in 2018 YOA for both investigation and SCA All examples here are merely illustrative and coverage would be subject to full terms and conditions
The detail… Costs, Charges and Expenses from an I nvestigation of the Com pany I nquiry Costs from an I nquiry of the Com pany Costs, Charges and Expenses as a nom inal defendant in a Derivative Suit Plaintiff Fees in a Derivative Suit Books and records cover, w ith a sub-lim it Explicit coverage for class certification fees I nquiry cover for insured persons including ( i) requests by court appointed trustees and liquidators and ( ii) third party litigation against the com pany ( in relation to non- indem ifiable loss) and ( iii) internal investigations ( also in relation to non-indem ifiable loss) I nquiry cover includes sw orn testim onies All examples here are merely illustrative and coverage would be subject to full terms and conditions
Entity Coverage Endorsement
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