Incidents that may later result in a claim are covered if reported during the policy period. The definition of loss usually covers the cost of defence which is included in the limit of liability. Most policies specifically exclude fines, penalties and damages that would be against public policy or interest to insure. To trigger coverage, a claim need only be made against the directors and officers during the policy period. A claim means any civil, criminal or written demand for monetary damage.
All policies contain exclusions to coverage.
Certain insurers will provide coverage for mergers and acquisitions, including hostile takeovers. Some insurers will even amend the personal injury section to include claims alleging discrimination or wrongful termination of employment. To insure a risk, the insurer makes an assessment based on the company profit and background, directors' history, as well as the industry's risk of being sued. For corporate Canada it is essential that appropriate legal and financial protection is provided for directors and officers. Without such protection, corporations and their managers may find themselves locked into a vicious cycle.