Overview: Side A, B & C Covers in a D&O Policy
- Directors and Officers (D&O) Insurance protects executives and companies from financial losses due to claims alleging wrongful acts, breaches of fiduciary duty, or regulatory violations.
- D&O policies typically include three coverage layers:
- Side A: Direct protection for individual directors/officers when the company cannot or will not indemnify them, such as during insolvency or legal restrictions. Covers legal defense, settlements, and judgments—often on a first-dollar basis with no deductible.
- Side B: Reimburses the company for costs it incurs when indemnifying its executives—providing balance-sheet protection. Claims under this layer usually involve a deductible.
- Side C: Also known as entity coverage, it protects the company itself, especially in securities-related claims for publicly traded firms or broader entity claims for private firms.
- Not all insurers include Side C by default; coverage varies based on policy type and whether the company is public/private.
A Directors and Officers Liability insurance policy is a very effective and essential liability cover necessary for all types of organizations. The policy is necessary for well-established MNCs, small and medium enterprises (SMEs or MSMEs), and start-ups. Equally important is an understanding of three parts coverage in a D&O Insurance Policy vide, Side A, B, and C covers.
It offers coverage for the loss that arises when the directors and officers make mistakes in discharging their duties. Directors and officers of an organization may commit errors during the course of their jobs. However, these mistakes can cost you dearly. Third parties (customers, employees, shareholders, suppliers, or other stakeholders) may sue the company or the directors and officers. Legal settlements are expensive. Consequently, in the event of litigation, the company and the directors and officers might find themselves in financial trouble.
A D&O insurance policy takes care of this financial trouble. It covers the legal costs and the costs incurred in compensating third parties. The policy provides a comprehensive scope of coverage. The scope is divided into three parts – Side A, Side B, and Side C covers in a D&O policy.
Let’s understand what are three parts coverage in a D&O Insurance Policy
Side A cover of D&O Policy
In case the organization itself cannot come to the rescue of directors and officers, Side A cover protects them against financial liabilities. Thus, if the company files for bankruptcy or becomes insolvent and is unable to pay the claims on behalf of the directors and officers, the D&O policy pays the claims. Therefore, Side A cover protects the personal financial assets of the directors and officers of the company. If there is a liability for any wrongful acts, errors, or breach of duty, the directors’ and officers’ policy’s Side A cover will pay the legal costs and settlements.
Side B coverage in a D&O Policy
Side B cover of directors’ and officers’ liability policy covers the liability that the organization itself faces. The organization can face high financial costs when it defends its directors and officers and pays the costs incurred in litigation against them. Side B cover indemnifies the organization for this loss suffered. So, if the organization incurs legal costs and pays settlements to third parties on behalf of its directors and officers, it can claim reimbursement of such costs under the Side B cover of the D&O policy.
Side C cover under of Directors & Officers Insurance
Side C basically covers companies listed on the stock exchange. When these companies incur liabilities for the traded securities, the D&O policy covers them. Therefore, the policy covers the company against the liabilities that it suffers due to any securities-related grievances. Consequently, if the shareholders file a lawsuit against the company for any reason related to the securities traded on the stock exchange, Side C cover would indemnify the company for the legal costs incurred.
Hence, the three parts coverage in a D&O Insurance policy offer different features under a D&O policy. The organization should understand the coverage benefits in each section before buying the policy. Then, it should choose the most suitable types of covers that it requires for comprehensive and all-around protection.
SecureNow provides you with various options for a Directors and Officers Liability policy. These options offer the best benefits with costs that are significantly lower (at least 20% less price) than what you would otherwise get from the market.
If you need assistance finding the optimal D&O insurance for your employees, SecureNow is here to help. Contact us at 96966 83999 or write to us at support@secuenow.in and share your coverage requirements.
FAQs
- What is Side A cover in a D&O policy?
Side A protects directors and officers personally when the company is unable to indemnify them, such as in insolvency or legal prohibition, covering legal costs and settlements without deductible .
- How does Side B coverage work?
Side B reimburses the company for legal costs and settlements it pays on behalf of its directors/officers. It acts as a balance-sheet safeguard and typically includes a deductible .
- Who benefits from Side C coverage?
Side C protects the company entity itself. In public firms, it covers securities claims (e.g. shareholder lawsuits); in private firms, it may extend to a wider range of entity-level legal claims .
- Is Side C included in every D&O policy?
No—Side C coverage depends on policy design and company type. Public companies often require securities coverage, while private firms may opt-in for broader entity protection .
- What is a Side A DIC policy?
A Difference-in-Conditions (DIC) Side A policy acts as a standalone, offering broader protection than a combined ABC policy, often responding at the first dollar—even if the main policy does not.
- Why do companies need all three sides (A/B/C)?
- Side A: Shields the personal assets of directors/officers.
- Side B & C: Protect the company from paying large defense or settlement costs—preserving financial health and corporate reputation .
- What common exclusions apply to D&O policies?
Typical exclusions include intentional fraud, criminal acts, and insured vs insured claims (e.g., suing your own director), though some exclusions may be negotiable . - How does the deductible vary by coverage type?
- Side A: Usually no deductible (first-dollar coverage).
- Side B & C: Typically subject to deductibles, reducing their claim payouts.
About The Author
Rajesh
MBA Finance
With a wealth of expertise in the insurance realm, Rajesh is a distinguished writer specializing in articles focusing on directors and officers insurance for SecureNow. Boasting 9 years of experience in the industry, he profoundly understands the complexities surrounding directors and officers liability coverage. Their articles delve into the intricacies of D&O insurance, providing readers with invaluable insights into risk mitigation strategies and policy considerations. Renowned for their comprehensive knowledge and attention to detail, Rajesh is dedicated to delivering informative and engaging content that empowers individuals and businesses to navigate the complexities of insurance with confidence.
