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Side A, B & C Explained: The Three Pillars of a Directors and Officers (D&O) Liability Insurance Policy

Directors and Officers (D&O) liability insurance is structured around three distinct “sides” — Side A, Side B, and Side C — each addressing different insureds, exposures and allocation priorities. For boards, executives and risk managers in the United States (with special relevance to hubs like New York, San Francisco and Houston), understanding these three pillars is essential to designing a D&O program that protects individual decision-makers, reimburses corporate entities and covers securities-related exposures.

Quick overview: What each Side covers

  • Side A (Company pays or insurer advances for individual officers and directors)
    Protects individual directors and officers when the corporation cannot or will not indemnify them (e.g., bankruptcy, corporate charter limits, or indemnification prohibition).

  • Side B (Company reimbursement)
    Reimburses the company when it indemnifies its directors and officers for covered claims.

  • Side C (Entity coverage / “Company Coverage”)
    Protects the corporate entity itself — typically for securities claims (public companies) or specific entity exposures (some private companies) when that exposure is included.

Why the three-side structure matters (U.S. market focus)

  • Legal landscape: U.S. state corporate laws (Delaware, CA, NY) plus federal securities litigation create overlapping exposures between individuals and corporations.
  • Bankruptcy and insolvency: Side A is crucial when indemnity is unavailable (e.g., Chapter 11 debtors). New York and Delaware cases frequently test advancement and indemnity issues.
  • Securities suits: Public companies in markets like New York and San Francisco rely on Side C to pay securities class actions that name the company itself.

Detailed breakdown: Side A, B & C

Side A — Individual protection when the company can’t indemnify

Purpose: Protects individual directors and officers for indemnity gaps.
When it’s triggered:

  • Company insolvent or bankrupt
  • Corporate bylaws or governance prevent indemnifying the officer/director
  • Advancement denied or unavailable

Typical uses / examples:

  • Defense costs in shareholder derivative suits where corporate advancement is stayed
  • Civil penalties where corporate indemnification is prohibited

Key negotiation points:

  • Severability of warranties/representations for individuals
  • Advancement language (how fast the insurer advances legal fees)
  • Side A Difference in Conditions endorsements for public companies

Side B — Reimbursement to the company

Purpose: Reimburses the corporation when it has indemnified insured persons.
When it’s triggered: Company pays the defense or settlement on behalf of D&Os and seeks reimbursement under Side B.

Key considerations:

  • Usually follows the same limits as Side A unless separately scheduled
  • Subject to corporate indemnification obligations and internal approvals
  • Often the first layer a company will use for claims handling

Side C — Entity (Company) coverage

Purpose: Covers claims made directly against the corporate entity — most often securities lawsuits for public companies.
Who benefits: The corporation (the named insured) rather than individuals.
Important for: Public companies (NYSE, NASDAQ), large private companies facing M&A, ERISA suits, or regulatory investigations that name the company.

Limit notes: Side C can be purchased as part of a single D&O tower or as a separate policy; limits required for Side C in public companies are typically several million dollars or more depending on market capitalization and claims history.

Comparison table — Side A vs B vs C

Feature Side A Side B Side C
Primary beneficiary Individual D&Os Corporate entity (reimbursement) Corporate entity
Trigger when indemnification unavailable? Yes No (company must indemnify first) N/A
Typical claim types Derivative suits, regulatory claims against individuals Reimbursement for indemnified amounts Securities class actions, ERISA, corporate regulatory suits
Critical for bankrupt companies Yes Limited Yes (if company is defendant)
Typical limits (U.S. market ranges) $1M–$10M (small/mid-market) Matches Side A or higher $5M–$50M+ for public companies
Who controls defense strategy? Usually insured D&O/insurer coordination Company & insurer Company & insurer

Pricing examples and market context (U.S. cities: New York, San Francisco, Houston)

D&O pricing varies with size, industry, public vs. private status, claims history and governance. Market data and broker reports provide order-of-magnitude ranges:

  • Small private companies (startup to lower middle-market) — typical primary D&O limits of $1M/$1M can start around $3,000–$15,000 annually depending on revenue and risk profile. Major insurers that offer such policies include Chubb and Travelers. (Chubb and Travelers market pages cited below.)

  • Middle-market companies (revenue $50M–$1B) — typical premiums for $5M–$10M limits commonly run $25,000–$125,000+ annually; higher for litigious sectors (financial services, biotech). Major carriers include AIG, Aon-brokered placements, and specialty markets.

  • Public companies — premiums are highly variable. For mid-cap public companies with $50M–$1B market cap, $10M–$25M towers can result in six-figure premiums; large-cap or high-risk issuers can pay $250,000–$1M+ depending on market conditions, governance score, and securities exposure.

Specific carrier references and guidance:

  • Chubb’s D&O product oversees small to large enterprise solutions and publishes typical program structures on its product pages. Chubb D&O Insurance
  • Aon and Marsh routinely report soft/hard market cycles and typical premium ranges in broker market commentary; consult their market insights when budgeting D&O premiums. Aon D&O Insights | Marsh D&O overview

(Regional example) In New York and San Francisco, where securities litigation is concentrated and IPO activity is high, underwriters will price Side C/aggregate towers more conservatively — expect higher premiums and stricter underwriting than similar-risk companies headquartered in Houston, where energy sector-specific WRAPs and pollution exclusions may also impact pricing.

Practical purchasing tips (U.S. corporate buyers)

  • Buy sufficient Side A limits if individual directors demand protection independent of corporate indemnity; consider standalone Side A or a Side A DIC (Difference in Conditions) for public company IPO readiness.
  • Confirm advancement and severability language to avoid coverage being denied for misstatements by other officers.
  • Evaluate Side C attachment and limits carefully if you are a public company or plan to go public — securities claims drive aggregate loss.
  • Use experienced brokers and consider broker market reports (Aon, Marsh) to time renewals — market cycles materially affect premium and capacity.
  • Compare quotes from established carriers: AIG, Chubb, Travelers, Liberty Mutual, Beazley — each has different appetite and pricing for sectors and geographies.

Related resources (internal links)

Closing checklist for CFOs, GC and Risk Managers (U.S. focus)

  • Do you have explicit Side A limits sufficient for individual D&O risk tolerance?
  • Are advancement and severability provisions negotiated and documented?
  • Does your Side C limit align with your market cap/IPO plans and securities exposure?
  • Have you benchmarked premiums with broker reports (Aon/Marsh) and at least two carriers (Chubb, AIG, Travelers)?

Sources

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