July 1, 2015

Something that often gets asked of me is “what do I ask my current insurance agent when we are reviewing our current coverage?” This is such a great question, and there are many things to cover, so I am making it into a series for Coverage Corner! Up first – “What to ask about D&O coverage”.

Unfortunately, we live in a litigious society, and the potential for homeowners’ associations to get sued is ever present. Because of this, Directors & Officers coverage is a necessity. While many policies from carrier to carrier are quite similar, there are some major differences.

Are defense costs inside or outside the limit? The most expensive part of litigation is not usually a settlement, but paying the attorneys. Having defense costs outside of your coverage limit means there is another pool of money from which to pay your attorney(s), court fees, etc. Your coverage limit is then available to pay any judgments.

Does your umbrella coverage extend to your D&O policy? Some umbrella policies, but not all, extend to the Directors & Officers policy. Some carriers require that the insured specifically request this extension before they will add it. Double check with your agent. Better yet, request that this is shown on your certificate of insurance.

Is your policy “claims made” or “occurrence”? This is the difference between when the claim against the board was made versus when the alleged event occurred. If you have a claims made policy, it covers any claim that was made within the policy year. Occurrence policies only cover claims where the event happened during the policy period. So if someone makes a claim today about something that happened 2 years ago, a “claims made” policy should cover it while an “occurrence” probably would not. If you are switching from one type to another, there may be a time gap. Be sure you have an extended reporting period to cover the gap.

Terri Guest is the Northern California Sales & Marketing Representative for Berg Insurance Company and can be reached at Terri@berginsurance.com. Have an insurance question? Ask Terri and your question may be the subject of next month’s edition of Coverage Corner! If your question is picked, you will win a Starbucks gift card! This month’s winner is Tracy Dale from Associa Northern California!