Understanding D&O Policy Allocation

Law360, New York (November 15, 2011, 12:52 PM EST) -- Corporations buy directors and officers insurance to protect their senior managers and board members from operations-related liabilities.

Most D&O policies are reimbursement, or pay-on-behalf-of, policies under which the insurer does not have a duty to defend. A duty-to-defend carrier must appoint, hire and control defense counsel for its policyholder, and must pay 100 percent of defense expenses if even a sliver of a third-party claim is potentially covered.

By contrast, under most D&O policies, the policyholder retains the duty to defend itself, and is entitled to...
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