Who Does Your D&O Policy Protect? Side A, Side B and Side C

A D&O policy can protect different parties through different insuring agreements. Understanding those agreements helps a business distinguish protection for its leaders from protection for its balance sheet.

Side A: protection when an individual is not indemnified

Side A addresses covered loss of insured individuals when the organization does not indemnify them in circumstances recognized by the policy. This can become particularly important when indemnification is legally unavailable or the organization is financially unable to provide it.

The distinction matters because a promise in a corporate agreement and the money needed to honor that promise are separate issues. Side A coverage should be reviewed alongside the company's indemnification arrangements, not treated as a substitute for examining them.

Side B: reimbursement for the organization

Side B generally reimburses the organization for covered amounts it pays to indemnify insured individuals. A retention commonly applies. Review how the policy treats indemnification that the company is permitted or required to provide, including what happens if the company does not make that payment.

Side C: coverage for claims against the entity

Side C refers to entity coverage. Public-company D&O policies generally limit this agreement to securities claims. Private-company forms may provide broader entity protection, but their definitions and exclusions vary. A business should not assume that the same Side C description applies to every policy.

The shared-limit question

When individuals and the company share a limit, covered defense and settlement payments for one can reduce the protection available to the others. A priority-of-payments provision can establish payment order, but it does not create additional insurance limits.

Some organizations evaluate dedicated Side A insurance. A Side A difference-in-conditions policy may offer broader protection and defined drop-down features, subject to its own terms. It is different from simply buying another layer of ordinary excess coverage.

Ask the broker to explain who receives protection under each agreement, which retentions apply and whether dedicated individual protection is appropriate. Venture Commercial Insurance Services can help review those relationships so the program reflects both the organization's needs and its leadership exposures.

Editorial sources: IRMI reference, Chapters 1 and 6; Travelers Side A materials [3]; Chubb private- and public-company descriptions [1, 4].