The Problem – Management liability gaps
Standard D&O policies typically cover basic claims such as breach of fiduciary duty or negligence in financial disclosures. However, gaming and iGaming introduce specialized risks that may not be explicitly addressed. Common D&O policies may exclude claims arising from “illegal gaming” or regulatory fines, and they often do not include coverage for costs of investigations until final rulings. As a result, directors could face litigation or regulatory action with insufficient support.
For instance, after a cryptocurrency-driven online casino experiences a major hack, shareholders might sue the board for mismanagement. Without tailored D&O coverage, the personal assets of directors may be at risk if the company cannot indemnify them. Another gap is global exposure: a U.S. gaming operator might be sued in a foreign market for a local compliance failure, which standard policies might not clearly cover.
The Solution – Tailored D&O Coverage
A customized D&O insurance program for gaming executives includes:
- Regulatory and Enforcement Coverage: Protects directors against claims by regulators and enforcement agencies. This covers defense costs if officials allege violations of gaming laws, anti-money laundering regulations or data privacy rules. For example, if regulators accuse executives of inadequate KYC controls, this coverage funds legal defense and settlements.
- M&A and Capital Raising: Covers claims arising from mergers, acquisitions, public offerings and funding rounds. If investors sue over alleged misrepresentations in a prospectus or a failed funding deal, the D&O policy provides defense costs (Side B) and indemnity (Side C) to protect the personal assets of managers.
- Global Operations: Ensures the policy applies to claims in multiple jurisdictions. Executives are protected even if they face legal action abroad. The insurance covers cross-border investigations and legal proceedings in all markets where the company operates.
- Side A/B/C Structure: Includes explicit Side A coverage (direct protection of directors if the company cannot indemnify them), along with reimbursement coverage for the company (Side B) and broader claims by shareholders (Side C, if applicable). This structure ensures personal assets of leaders remain protected regardless of the company’s financial condition.
- Appropriate Limits and Retentions: Given the high-stakes nature of gaming, limits should be generous. A typical program might use a high retention to control costs but with ample excess layers. Side A only policies can also be layered to provide large executive protection independently of company indemnification.
Typical Claims Scenarios
- Regulatory Investigation: A gaming operator is accused of violating licensing rules in multiple states. Regulators subpoena the executives. D&O insurance covers the cost of responding to the investigation and any defense expenses, even if no final penalties are imposed.
- Shareholder Lawsuit: After a high-profile game launch failure, a class of shareholders sues the board for fraud in valuation. The D&O policy pays for attorneys to defend the directors and any settlement if the claim is settled.
- Data Breach and Share Drop: A data breach at a gaming platform exposes millions of player records, leading to a stock price crash. Investors sue the executives for not protecting customer data adequately. D&O coverage funds the defense.
- Employment Practices: A senior employee sues the company’s leadership for harassment or wrongful termination (covered under the broader management liability package often included with D&O). The policy provides legal fees and settlements for the directors involved.
Pro Tip
Structure your D&O program with care. If your company is closely held or a startup, consider Side A only coverage with high limits to protect founders personally. Ensure your retention levels reflect the financial size and risk profile of the company. Regularly update the insurer about any corporate events (new funding rounds, IPOs, board changes), as these can affect coverage terms and premium.
Underwriters will scrutinize corporate governance: maintain strong compliance programs, transparency with investors, and clearly documented procedures for AML/KYC and data security. Providing evidence of robust risk management (such as regular audits and a formal Board process) can improve terms and reduce exclusions.
