Checklist for Purchasing Run‑Off Coverage: Questions to Ask Your Broker for Directors and Officers (D&O) Liability Insurance

Directors and Officers (D&O) liability exposure doesn’t end when a company is sold, winded down, enters bankruptcy, or leaders resign. Run‑off (tail) coverage preserves protection for claims made after the policy period for acts that occurred during it. For companies and executives in the United States — particularly in hubs like New York, Delaware, California, and Texas — selecting the right run‑off solution requires careful negotiation and data‑driven pricing analysis.

This checklist is tailored for U.S. boards, CFOs, general counsels, and exiting executives who need to evaluate D&O run‑off (tail) options with their broker. It includes the core questions to ask, pricing benchmarks, coverage comparisons, and negotiation tips.

Table of Contents

H2 — Quick definitions (to frame the conversation)

Run‑off (Tail) Coverage: Extension or purchase that covers claims made after a policy expires for wrongful acts that occurred during the policy period (also called “tail” for claims‑made policies).
Buy‑side (Buy‑out) Tail: Purchased by the buyer in an M&A to insure historical exposure after the deal.
Sell‑side Tail: Purchased by the seller to secure continuity of coverage for historical acts after selling the company.
Prior Acts / Retroactive Date: The date before which wrongful acts are not covered; critical for assessing historical exposure.

H2 — Core checklist: Questions to ask your broker

Use this checklist in meetings and emails. Grouped by legal, financial, and practical considerations.

H3 — Scope & triggering language

What exact policy forms and endorsements are included in the run‑off quote?
Does the run‑off cover claims first made and reported during the tail period, or must the claim be made during the policy period and only reported later?
Are ERISA, FDIC/SEC investigations, and tax‑related governmental claims explicitly covered or excluded?
How does the policy define “insured person” and will former directors/officers be explicitly listed?

H3 — Retroactive/prior acts exposure

What retroactive date is being applied? Is it “full prior acts” or limited to a specified date range?
If there are known historical incidents, will they be carved out or scheduled?

H3 — Duration, limits & allocation

What duration is recommended (1, 3, 6, 10 years, or perpetual for bankruptcy buyouts)?
Will an aggregate limit apply to all claims during the tail period, and is it the same as the expiring limit?
Can limits be stacked or layered across insurers (portfolio approach)?

H3 — Pricing & cost drivers

What is the quoted premium as a percentage of the expiring annual premium? (Get the % and absolute dollars.)
Which risk factors are driving price: industry, pending litigation, bankruptcy, prior claims, SEC exposure, revenue size, jurisdiction (e.g., NY vs. Delaware)?
Are there retentions/deductibles that increase during the tail?

Benchmark insight: market rule‑of‑thumb for run‑off pricing often ranges from ~100% to 300% of an expiring annual premium, depending on risk. See cost briefs from Marsh and Forbes Advisor for market context. (Sources at the end.)

H3 — Carrier & security concerns

Which carrier(s) will underwrite the run‑off? (e.g., Chubb, AIG, Travelers, Hiscox, Beazley)
What AM Best / S&P ratings does the insurer have and how does that impact claim handling assurances?
Are there reinsurers or fronting arrangements that affect security?

Example carriers and distribution:

Chubb and AIG are commonly used for middle market and large caps.
Hiscox, Beazley, and Travelers often compete on small‑to‑mid market D&O placements.
Ask for carrier-specific loss runs and examples of similar run‑off matters they’ve handled.

H3 — Claims handling & cooperation

Who is the appointed claims handler? What is the claim escalation process?
Are defense counsel choices subject to insurer approval?
What notice obligations must insureds meet during the tail period?

H3 — Carve‑outs, exclusions & negotiation levers

Are there any punitive damages, fraud, or prior knowledge exclusions?
Can you negotiate known claims as scheduled matters rather than exclusions?
Will the insurer accept representations & warranties (R&W) from buyer/seller to narrow exposures?

See negotiation guide: Negotiating Run‑Off Terms After an Exit: Practical Clauses Every Executive Should Request in Directors and Officers (D&O) Liability Insurance.

H2 — Pricing table: Typical run‑off structures and market expectations (U.S. market)

Run‑off Type	Typical Duration	Typical Cost (as % of expiring annual premium)	Use case / Notes
Short tail / 1 year	1 year	30%–100%	Low residual risk; small private companies
Medium tail / 3 years	3 years	100%–200%	Common for middle market buy‑outs
Long tail / 6–10 years	6–10 years	150%–300%	Higher litigation risk; public or SEC exposure
Perpetual / bankruptcy buy‑out	Perpetual	Negotiated lump sum (often multiples >300%)	Required in Chapter 11 sale conditions

Notes: actual premium varies widely by industry, claims history, jurisdiction (NY/DE tends to be higher due to litigation environment), and carrier appetite. See market references from Marsh and Forbes below.

H2 — Practical negotiation tips (U.S. specific)

Get competing quotes from at least three insurers and demand firm written justifications for price differentials.
Consider a portfolio approach: use layered limits with different carriers to optimize price vs. security. See Portfolio Approach to Prior Acts.
Document operations & controls: underwriting expects robust corporate governance documents, claims‑handling history, and remediation steps—these materially lower pricing.
For M&A: require representations & warranties insurance coordination and confirm whether buyer or seller will assume payment responsibility for the tail.
Insist on clear reporting obligations and avoid ambiguous “knowledge” qualifiers that can widen exclusions.

H2 — Example cost scenarios (U.S. city focus)

A privately held tech company headquartered in San Francisco, CA with $50M revenue and limited claims exposure might see a 3‑year run‑off quote of $30k–$75k, depending on prior premium and carrier.
A mid‑market financial services company in New York, NY with prior regulatory inquiries may face a 6‑year run‑off quote of $200k–$750k or higher, reflecting SEC/regulatory risk and NY litigation exposure.
Small nonprofit or startup in Austin, TX often finds annual D&O premiums of $1k–$10k, with a one‑year tail costing a similar multiple of the expiring premium. (Figures illustrative — obtain firm quotes.)

For market averages and small‑business D&O costs, see Forbes Advisor; for run‑off market practices, see Marsh. (Sources below.)

H2 — Final steps before signing

Obtain a formal run‑off policy word‑for‑word and have corporate counsel and coverage counsel review.
Request a side letter or confirmation addressing any negotiated carve‑ins / carve‑outs (e.g., scheduled known claims).
Verify certificate wording and ensure former directors/officers are listed or that the policy extends to them by definition.
Secure payment terms and confirm whether premium is payable in full or can be financed (note: financing often increases total cost).

Sources & further reading

Marsh — Run‑Off Insurance: What is it and when is it needed? https://www.marsh.com/us/insights/research/run-off-insurance-what-is-it-and-when-is-it-needed.html
Forbes Advisor — How Much Does D&O Insurance Cost? https://www.forbes.com/advisor/business-insurance/directors-and-officers-insurance-cost/
Hiscox — Directors and Officers Insurance (small business context) https://www.hiscox.com/small-business-insurance/directors-and-officers-insurance/
Chubb — Directors and Officers Insurance (carrier perspective) https://www.chubb.com/us-en/business-insurance/directors-and-officers-insurance.html

If you need, I can convert this checklist into a printable one‑page PDF for your board or prepare a broker Q&A email template tailored to your jurisdiction (e.g., New York or Delaware).