A D&O plan may consist of up to four insurance clauses, referred to as “sides,” that apply to the different liability scenarios that directors, officers, and organizations may face:
Side A (non-indemnified): This component applies to officers and directors when the organization is legally unwilling or unable to compensate them for their loss. In other words, Side A safeguards individual officers and directors against claims for which the organization won’t provide coverage.
Side B (indemnified): Side B is the portion of the policy that typically applies to the majority of D&O claim situations. It reimburses the organization for the indemnification obligations it has to its directors and officers.
Side C (entity securities coverage): This coverage protects corporations (as opposed to individual directors and officers) against claims resulting from the offer, sale or purchase of shares of their stock.
Side D (shareholder derivative): Some D&O policies may also provide this coverage, which pays for the costs of investigations into shareholder derivative claims. These claims typically take the form of lawsuits filed by one or several shareholders on behalf of the organization against a third party (which may be an officer or director) when management fails to do so in situations involving a financial loss.