In June, we shared our thoughts around common insurance gaps and insurance riders that CCOs as well as managers should understand. One of the gaps we shared related to pre-claim defense costs. In August, a court ruled on behalf of an insurer in that they were not required to cover the insured for costs related to investigations prior to the Issuance of a Wells notice.
Today, we share a few tips related to tail insurance:
- CCOs should review how insurance will cover him or her after they leave the firm. Most policies from leading insurers cover any past, present of future directors, officers, partners and employees. However, low cost insurance policies may not do this.
- CCOs should review employment contracts and consider requesting this detail in the employment contract. Specifically, that the firm obtains insurance that covers past officers so the CCO would be covered post-departure for work done when CCO.
- Firms should negotiate tail coverage in advance of purchasing a policy. If the firm is unfortunate enough to be hit with litigation during the policy term, and does not already have this coverage, the availability for tail coverage may be limited or cost prohibitive at that point.
- Tail insurance is extremely important when considering acquisitions as well. Acquiring firms should avoid legal liability of acquired firms by ensuring that the acquired firm purchases its own policy extending coverage to match the various state statutes of limitations for bringing a claim.
We will share our whitepaper “CCO Liability (Part III): Managing Liability: Navigating Indemnities and Insurance Options” subsequent to NSCP publishing it this month. Our whitepaper will hit on additional topics including cyber insurance.