The ABC’s Of Canadian Directors And Officers Insurance Coverage

The ABC’s Of Canadian Directors And Officers Insurance Coverage

Canadian directors and officers insurance is an insurance product that is complex and unfortunately poorly understood by many. Because ALIGNED Insurance is an insurance brokerage with deep experience and expertise in Canadian directors and officers insurance, we thought we’d go back to the basics and explain The ABC’s of Canadian directors and officers insurance coverage. To understand Canadian directors and officers insurance it’s important to know that a Canadian directors and officers insurance policy is effectively an “all-risk” liability insurance policy which means that everything that satisfies the definition of loss/claim and wrongful act is covered unless it’s excluded.

With clarity on that, the next key section of Canadian directors and officer insurance to understand is the indemnification section of the Canadian directors and officers policy as it makes clear how the policy responds and who it covers in 3 distinct ways.  The distinction between the 3 different insuring agreements is important as it determines the deductibles or self-insured retentions that do or don’t apply.  In addition and, more importantly, the insuring agreements in Canadian director’s and officers’ insurance policies also explain how coverage will respond based on the 3 different real-world claims scenarios.

Side A Canadian Directors And Officers Insurance Coverage 

Commonly called Side A coverage, is coverage for individuals that are covered by the scope of the insured person definition within the wording. Side A coverage is often the most valued and important insuring agreement to board members as it responds to cover defence costs and any covered settlements or judgements against the directors and/or officers should the legal entity not be able or be willing to indemnify anyone insured person. Typically no deductible or self-insured retention should apply to Side A Canadian directors and officer’s insurance claims.

Side B Canadian Directors And Officers Insurance Coverage 

Also known as corporate reimbursement coverage, Side B coverage reimburses the legal entity for defence costs or settlement and judgments it pays via the indemnification provisions of its corporate bylaws to its directors and/of officers and is typically subject to a deductible or self-insured retention.

Side C Canadian Directors And Officers Insurance Coverage 

Side C coverage is unique and was added to Canadian directors’ and officer’s insurance policies to specifically respond to derivative actions. Derivative actions are when the employees of an organization bring a suit against the board and entity.