Legal: D&O - Remedies for a hard market.

(From Reinsurance)

Byline: John Hughes and John Emmanuel.

Over the last decade, insureds of directors' and officers' (D&O) liability insurance coverage have enjoyed unprecedented expansion of coverage.

As carriers sought market share in the 1990s, the market saw the introduction of entity coverage, bankruptcy coverage, employment practices coverage, lower retentions, rate decreases and multi-year policies.

Historically, D&O policies had two parts: coverage A provided direct reimbursement to the directors and officers for third party claims; and coverage B reimbursed the corporation if it was required or permitted, under state law or the corporate charter or bylaws, to indemnify the directors and officers. In the late 1990s, coverage C was written into most policies providing entity coverage for at least securities claims made against the corporation directly, including those that named no individual insureds.

The current business climate

Since 2002, sharp stock market declines, the emergence of improper accounting practices, more financial restatements, increased regulatory legislation, and an increasingly litigious environment all contributed to the increased frequency and greater severity of D&O claims.