Insurance Curator Directors and officers (D&O) liability insurance is essential for executive protection, but not all D&O policies protect the individuals who need it most: fiduciaries forced to pay defense costs or settlements when the corporate entity cannot—or will not—indemnify them. A Side A enhancement endorsement (also known as a Side A Difference‑in‑Conditions or Side A DIC enhancement) fills that gap. This article explains how a Side A enhancement changes coverage, when U.S. organizations in markets like San Francisco, New York City, and Chicago should request it, what it typically costs, and how to negotiate favorable wording.
What is a Side A Enhancement (briefly)
- Side A coverage protects individual directors and officers when the company cannot indemnify them (e.g., bankruptcy, insolvency, or indemnity prohibition).
- A Side A enhancement endorsement broadens that protection by:
- Removing or softening exclusions that insurers often apply to Side A.
- Increasing limits available to individuals (sometimes by creating a separate single‑limit for Side A).
- Making the Side A coverage follow form with primary policy terms or creating a standalone DIC layer.
For a primer on common endorsements and when to request them, see Top Endorsements That Matter in Directors and Officers (D&O) Liability Insurance and When to Request Them.
How Side A Enhancements materially change protection
1) Greater first‑dollar protection for individuals
Without enhancement: companies often pay defense and settlements (indemnification). If the company cannot indemnify, Side A coverage may be limited or subject to exclusions.
With enhancement: Side A becomes a true first‑line defense for individuals, often providing:
- First‑dollar defense and indemnity payment for directors and officers.
- A separate Side A limit that cannot be eroded by entity claims (important in securities, ERISA, or bankruptcy scenarios).
2) Narrowed or removed exclusions
Insurers commonly add exclusions (e.g., fraud, intentional breach, bodily injury/pollution) that can swallow Side A protection. Enhancements often:
- Remove or narrow broad‑form exclusions.
- Clarify that Side A applies even where entity coverage is rescinded.
3) Improved coordination with entity/Side B and Side C layers
A Side A enhancement can:
- Make Side A “follow form” with Side B (company reimbursement) and Side C (entity/Securities), preventing gaps where one layer applies but the other doesn’t.
- Provide priority wording so individuals access Side A first, preserving Side B/C limits for entity exposures.
4) Broader triggering and defense provisions
Enhanced endorsements may expand what constitutes a claim, cover derivative suits more clearly, or provide broader consent and cooperation clauses protecting directors’ interests during investigations.
See related guidance on run‑off and entity coverage at When to Add Run‑off, Side C or Entity Coverage Endorsements to Your Directors and Officers (D&O) Liability Insurance.
Who needs a Side A enhancement? U.S. use cases
- Public companies (New York / NASDAQ / NYSE listed): Securities suits and SEC investigations make Side A critical; public companies face large individual exposures if indemnification is limited by insolvency or director‑level settlements.
- Private growth companies (San Francisco / Bay Area techs): Rapid capital raises, M&A, and bankruptcy risk create indemnity uncertainty—investors and board members often require robust Side A.
- Nonprofits and trade associations (Chicago, NY): Limited resources make entity indemnity uncertain; Side A protects volunteer directors.
Typical cost expectations (U.S. market ranges and examples)
Pricing depends on company size, industry, claims history, limits requested, and whether the endorsement is attached to primary or excess layers.
Estimated incremental pricing (U.S., 2024 market context):
- Small private company (limit needs: $1–5M Side A enhancement): $5,000–$25,000 annually.
- Middle‑market private company (limit needs: $5–10M): $20,000–$75,000 annually.
- Public or high‑profile targets (limits $10M+ or standalone Side A DIC): $75,000–$250,000+, potentially into the $500,000–$1M+ range for very large placements or high litigation risk.
Insurers known for strong Side A products include Chubb, AIG, and Travelers; Chubb and AIG public pages discuss management liability offerings and features (see Chubb and AIG links below). Premiums for a Side A enhancement are often quoted as a percentage uplift to base D&O premium—roughly 5%–25% depending on breadth and limit. Standalone Side A DIC policies (common for PE‑owned portfolios or funds) often start higher because they provide separate limits and broader wording.
Sources for market context:
- Investopedia D&O overview: https://www.investopedia.com/terms/d/directors-and-officers-insurance.asp
- Chubb D&O product page: https://www.chubb.com/us-en/business-insurance/directors-and-officers.html
- AIG management liability overview: https://www.aig.com/business/insurance/management-liability
(Note: get broker quotes—Aon, Marsh, or Willis Towers Watson can provide firm pricing for your situation.)
Coverage comparison: Typical policy without Side A enhancement vs with enhancement
| Feature / Scenario | Standard D&O (no enhancement) | D&O with Side A Enhancement |
|---|---|---|
| First‑dollar defense for directors when company insolvent | Often limited or obstructed | Covered; Side A pays directly |
| Separate, non‑erosible limit for individuals | Rare | Common with enhancement |
| Broad exclusions (fraud, bankruptcy carve‑outs) | Frequently present | Narrowed or removed |
| Coordination among Side A/B/C | Potential gaps | Follow‑form and priority wording to avoid gaps |
| Cost impact | Lower base premium | Incremental premium (see ranges above) |
| Use case | Stable indemnity environment | When indemnity is uncertain (bankruptcy, M&A, enforcement) |
Negotiation and wording tips (U.S.-focused)
- Insist on a Side A Non‑Rescindable wording or limiting rescission only to fraud by the individual insured (not company‑level rescission).
- Seek priority of payments or “Side A priority” so individuals can access Side A without insurer forcing depletion of Side B or C.
- Define insured person broadly: include de‑facto officers, committee members, and fiduciaries.
- Clarify interplay with securities and ERISA claims—some Side A enhancements explicitly include securities‑type claims.
- Engage experienced coverage counsel and your broker. See negotiation guidance at Negotiation Tips: Getting Favorable Wording for High‑Value Endorsements in Directors and Officers (D&O) Liability Insurance for deeper tactics.
When to buy a Side A enhancement (practical triggers)
- Company is approaching bankruptcy, restructuring, or has liquidity strain.
- M&A activity where sellers want protection post‑closing or buyers need reps & warranties risk allocation.
- Board members are high‑profile (CEOs, CFOs) or the company is in a regulated industry (financial services, healthcare).
- Investors (PE/VC) or outside board appointees demand standalone protection.
Also consider broader wording to close gaps—learn how broad form endorsements operate at How Broad Form Endorsements Can Close Coverage Gaps in Directors and Officers (D&O) Liability Insurance.
Action plan (for U.S. CFOs, GC, and board chairs)
- Review current D&O policy for Side A limits and exclusions.
- Ask your broker for a Side A enhancement quote and a comparison of cost vs. incremental protection (request quotes from Chubb, AIG, and at least one other carrier).
- Engage coverage counsel to redline proposed endorsement language.
- If undertaking M&A, financing, or restructuring in markets like New York, San Francisco, or Chicago, prioritize Side A enhancements in insurance diligence.
- Maintain documentation of indemnity agreements and board resolutions to demonstrate indemnification availability (or lack thereof) to insurers.
A properly negotiated Side A enhancement converts D&O protection from “good to have” to “mission critical” for individuals when corporate indemnity may fail. For tailored analysis tied to your state and industry risk profile, work with your broker and counsel to compare specific insurer terms and firm quotes.
External references:
- Investopedia — Directors and officers (D&O) insurance: https://www.investopedia.com/terms/d/directors-and-officers-insurance.asp
- Chubb — Directors and Officers insurance: https://www.chubb.com/us-en/business-insurance/directors-and-officers.html
- AIG — Management liability & officers and directors coverage: https://www.aig.com/business/insurance/management-liability
Related reading:
- Top Endorsements That Matter in Directors and Officers (D&O) Liability Insurance and When to Request Them
- When to Add Run‑off, Side C or Entity Coverage Endorsements to Your Directors and Officers (D&O) Liability Insurance
- How Broad Form Endorsements Can Close Coverage Gaps in Directors and Officers (D&O) Liability Insurance