However, Stone warns that this may not always be the best solution. Separate products mean separate limits, he points out. When the two products are combined, an employment practices problem could dilute the coverage for directors and officers. While an endorsement may be cheaper than a separate policy, it also means that coverage is less as well. This is a particularly important distinction for smaller banks where one employment practice problem can have a serious impact on the bottom line.
Larger banks have the wherewithal to weather one or two suits.
If a merger or acquisition is in the offing, directors and officers will be placed under increased scrutiny. Questions will arise concerning whether they obtained independent opinions concerning the value of the bank, whether they solicited bids from more than one acquirer, and so on. The question of run-off also could create liability. It's important for the bank being acquired to have a run-off policy. Another area where policies may differ is in the way that defense costs are handled.