Disclaimer: Directors & Officers Policies are often very complicated and complex with language differing from one policy to another so always make sure to review your policies. The following blog is speaking broadly towards the Regulatory portion of a Directors & Officers policy. With that being said this will not hit on every detail of the Directors & Officers policy but providing ground rules that can be applicable to the regulatory portion of the policy.
When it comes to Directors and Officers (D&O) insurance, navigating regulatory coverage can be complex. Due to the complexity, we have decided to break it down for you and clarify how regulatory coverage is addressed under a D&O policy.
The Essence of D&O Policy Coverage
Unlike some insurance policies that specify particular regulators or government agencies as covered claimants, D&O policies operate differently. Instead of naming specific entities, these policies center on the nature of the claim and the insured parties involved.
Defining a Regulatory Claim
The definition of a “Claim” is very important while looking at D&O policies, and can be triggered by:
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Regulatory Proceeding: This can involve monetary, non-monetary, or injunctive relief and applies to all Insureds, including both Insured Persons and the Organization.
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Regulatory Investigation: This applies specifically to Insured Persons and involves an inquiry by a regulatory body.
Commencement of Proceedings and Investigations
In order for coverage to apply under these conditions, specific commencement events must occur:
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Regulatory Proceedings: These are considered commenced when there is service of a complaint or similar pleading, or the filing of a notice of charges, formal investigative order, or similar document.
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Regulatory Investigations: These are deemed commenced upon receipt of a written notice from the investigating authority, which must explicitly identify an Insured Person as a target against whom a regulatory proceeding may be initiated.
Key Takeaways
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Coverage Focus: Certain policies do not specify which regulators are covered but rather focus on the type of regulatory action and the involved parties.
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Scope of Coverage: Regulatory proceedings apply broadly to all Insureds, while investigations are more narrowly focused on Insured Persons.
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Commencement Events: Understanding the specific events that trigger coverage under the policy is crucial for ensuring that you are adequately protected.
By familiarizing yourself with your D&O policy, you can better navigate the complexities of regulatory coverage and ensure that you are well-prepared in the event of regulatory actions. If you have any questions about your policy or need further clarification, don’t hesitate to reach out!
