Meaning
Specialized insurance provides dedicated protection for individual directors and officers against claims when the corporation is unable or legally prohibited from indemnifying them. The implementation of Side A runoff coverage protects the personal assets of leaders after a merger or acquisition has concluded. This contract is non-cancellable and remains active for a multi-year period, covering claims arising from acts that occurred before the corporate transaction.
Policy Scope
Runoff protection focuses entirely on claims where the corporate entity cannot indemnify its leaders due to insolvency or legal restrictions. The policy does not cover the liabilities of the corporation itself. This separation guarantees that the insurance limit is reserved exclusively for the personal protection of the directors.
Personal Indemnification
Individual assets remain exposed to shareholder lawsuits and regulatory investigations after a company is acquired. This insurance ensures that defense costs and settlement amounts are paid directly to the affected individuals without the need for corporate approval. This protection is critical during insolvency proceedings when corporate indemnification is frozen or canceled by bankruptcy courts.
Deductible Exclusion
The runoff contract operates with no deductible for the individual directors, ensuring that they do not pay out-of-pocket costs for their defense. This exclusion is a major difference from standard corporate liability policies where the corporation must meet a high retention limit before coverage begins. Because the individual does not pay a deductible, the policy begins to pay claims from the first dollar of loss.
