Demand For ‘Side A’ Policies Surges

The current mergers and acquisitions environment is making errors and omissions claims for officers and directors more complex. The ongoing subprime crisis and escalating proxy fights also add to the mix,  widening the window for exposure to liabilities for directors and officers, according to panelists at the recent RIMS Canada conference in Toronto.

Murn Meyrick, senior vice president and corporate counsel for Executive Risk Insurance Services, sketched out the risk landscape—and its effects—in a panel discussion. She noted that as a result, Side A Difference in Conditions (DIC) insurance policies to protect directors and officers is becoming increasingly popular in Canada.

“It’s a policy that will only respond in non-indemnity situations, where the director or officer’s personal assets become exposed because they’re not getting indemnification from the company,” said Meyrick, the sole lawyer on a panel of risk managers at the session.

In an interview with Canadian Insurance, she explained that there has been a surge in litigation in the aftermath of merger or acquisition transactions especially for business entities going private.

Side A DIC policies have been in demand for several years in the United States and Canada is picking up on the trend. Meyrick noted that as shareholders become more savvy and litigious, and as indemnification protections become less iron-clad in the face of significant corporate fraud, derivative actions, and conflicting interests between former and current management, the insurance is quickly becoming essential.

This story was originally published by Canadian Insurance Top Broker.