{"id":20520,"date":"2026-11-11T11:11:19","date_gmt":"2026-11-11T09:11:19","guid":{"rendered":"https:\/\/lamdabroking.com\/?p=20520"},"modified":"2026-11-11T11:11:19","modified_gmt":"2026-11-11T09:11:19","slug":"side-a-do-insurance-independent-directors","status":"publish","type":"post","link":"https:\/\/lamdabroking.com\/en\/side-a-do-insurance-independent-directors\/","title":{"rendered":"Side A D&#038;O Insurance for Independent Directors"},"content":{"rendered":"<p dir=\"ltr\"><span style=\"font-weight: 400;\">Side A is the part of a directors and officers (D&amp;O) policy that pays the director directly when the company cannot or will not indemnify. Before accepting a board seat, an independent director should read the policy wording and the indemnification letter, and find out how much of the limit would actually remain for individuals if the company itself is sued.<\/span><\/p>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">The document that usually arrives with a board invitation is a certificate confirming a policy and a limit. It does not tell you who else shares that limit, or what is left if the company fails or you have already stepped down when the claim arrives. This page is written for outside and independent directors, from statutory external directors on Israeli boards to fund nominees, and for the companies recruiting them. A general introduction is available at <\/span><a href=\"https:\/\/lamdabroking.com\/en\/what-is-do-insurance\/\"><span style=\"font-weight: 400;\">What Is D&amp;O Insurance?<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<h2 dir=\"ltr\"><span style=\"font-weight: 400;\">Key points<\/span><\/h2>\n<ul dir=\"ltr\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Side A pays the director personally<\/b><span style=\"font-weight: 400;\"> when the company does not indemnify, whether because the law prohibits it or because the company has collapsed. In a healthy company most claims run through indemnification and Side B, so Side A is tested at the worst possible moment.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>In a public company the limit is shared.<\/b><span style=\"font-weight: 400;\"> A securities class action against the company (Side C) can exhaust the same limit that protects the directors, unless there is a priority of payments clause or a dedicated Side A layer.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>A Side A DIC policy<\/b><span style=\"font-weight: 400;\"> sits above the main programme and protects individuals only. It drops down when the underlying layers do not pay, and the insurer usually gives up the right to rescind it.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Israeli law allows insurance for some liabilities it bars from indemnification<\/b><span style=\"font-weight: 400;\">, for example liability to the company itself for breach of the duty of care. Monetary sanctions and fines stay outside both indemnification and insurance, under section 263 of the Companies Law and section 56H of the Securities Law.<\/span><\/li>\n<\/ul>\n<h2 dir=\"ltr\"><span style=\"font-weight: 400;\">Three sides, one limit: what each part of the policy covers<\/span><\/h2>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">A D&amp;O policy is normally built from three insuring agreements that share a single limit. Only one of them, Side A, pays the director without passing through the company.<\/span><\/p>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">Side B reimburses the company for indemnification it has paid. Side C covers the company as a defendant, and in a public company it is usually limited to securities claims. In a private company entity cover is broader, so erosion can also come from customer and employee claims (<\/span><a href=\"https:\/\/lamdabroking.com\/en\/do-insurance-for-private-vs-public-companies\/\"><span style=\"font-weight: 400;\">D&amp;O for private vs public companies<\/span><\/a><span style=\"font-weight: 400;\">). The table summarises the parts of a typical <\/span><a href=\"https:\/\/lamdabroking.com\/en\/directors-and-officers-insurance\/\"><span style=\"font-weight: 400;\">D&amp;O insurance<\/span><\/a><span style=\"font-weight: 400;\"> programme.<\/span><\/p>\n<p dir=\"ltr\"><b>The parts of a D&amp;O programme and what each one leaves out:<\/b><\/p>\n<table dir=\"ltr\">\n<tbody>\n<tr>\n<td><b>Coverage part<\/b><\/td>\n<td><b>What it is meant to respond to<\/b><\/td>\n<td><b>Who receives the money<\/b><\/td>\n<td><b>The limitation to know<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Side A: insured persons, non-indemnifiable loss<\/span><\/td>\n<td><span style=\"font-weight: 400;\">A claim against a director when the company does not indemnify, because the law bars it or the company is insolvent<\/span><\/td>\n<td><span style=\"font-weight: 400;\">The director, directly<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Usually shares one limit with Side B and Side C, subject to wording<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Side B: company reimbursement<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Reimburses the company after it has paid defence costs or a settlement for an officer<\/span><\/td>\n<td><span style=\"font-weight: 400;\">The company<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Triggered only after the company pays; the company retention applies<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Side C: entity cover<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Claims against the company itself; for public companies mainly securities claims<\/span><\/td>\n<td><span style=\"font-weight: 400;\">The company<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Erodes the shared limit, sometimes very quickly<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Side A DIC: dedicated layer<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Non-indemnifiable loss above the programme, including when underlying layers fail to pay<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Insured persons only<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Exists only if purchased; check the drop-down triggers<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Outside directorship liability (ODL)<\/span><\/td>\n<td><span style=\"font-weight: 400;\">A director appointed by a fund to a portfolio company board, under the fund policy (<\/span><a href=\"https:\/\/lamdabroking.com\/en\/insurance-for-venture-capital-funds-and-private-equity\/\"><span style=\"font-weight: 400;\">VC and PE fund insurance<\/span><\/a><span style=\"font-weight: 400;\">)<\/span><\/td>\n<td><span style=\"font-weight: 400;\">The director, as excess cover<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Usually pays only after portfolio company indemnification and insurance<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 dir=\"ltr\"><span style=\"font-weight: 400;\">When the company will not indemnify: the gap Israeli law leaves<\/span><\/h2>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">The Israeli Companies Law recognises three protections for an office holder: exemption, indemnification and insurance. Each one reaches different situations, and Side A exists for the cases where indemnification is blocked but insurance is still allowed.<\/span><\/p>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">An advance exemption (section 259) applies only to breach of the duty of care towards the company, and never to a distribution. Indemnification (section 260) covers monetary liability in favour of another person and reasonable litigation expenses. An advance undertaking to indemnify must be limited to events the board considers foreseeable in light of the company&#8217;s actual activity, and to an amount or criterion the board found reasonable. Both must be written into the indemnification letter itself. Insurance (section 261) is wider and can cover breach of the duty of care towards the company itself. So liability to the company, for instance in a successful derivative action, falls outside indemnification and may be covered only by insurance. Section 263 removes all three protections for breach of the duty of loyalty (except insurance and indemnification where the office holder acted in good faith), for intentional or reckless breach of the duty of care and for unlawful personal gain, and for any fine, civil fine, monetary sanction or ransom.<\/span><\/p>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">Administrative enforcement by the Israel Securities Authority is stricter still. Section 56H of the Securities Law prohibits insuring an administrative proceeding and prohibits a company from paying a monetary sanction imposed on someone else. The exception covers payments to the injured party and the expenses of the proceeding, which may be indemnified or insured if the articles allow it. The hardest scenario is insolvency. A collapsed company will not indemnify even under a valid letter, and the trustee may be the plaintiff. Section 288 of the Insolvency and Economic Rehabilitation Law requires directors and the CEO to take reasonable steps to limit the extent of insolvency, which opens a route to personal claims.<\/span><\/p>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">That is the moment Side A was designed for.<\/span><\/p>\n<h2 dir=\"ltr\"><span style=\"font-weight: 400;\">The shared limit: how a claim against the company eats the director&#8217;s protection<\/span><\/h2>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">In a public company a securities class action is normally filed against the company and the directors together, and both draw on the same limit. A high limit on the declarations page does not guarantee that the money will still be there for individuals.<\/span><\/p>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">The company&#8217;s defence costs and the class settlement come out of that limit, and so does any derivative claim that follows. Allocation between the company and the individuals decides how much is covered, but it does not enlarge the limit. To ring-fence part of it for directors, programmes use one or more of these devices:<\/span><\/p>\n<ul dir=\"ltr\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>A priority of payments clause<\/b><span style=\"font-weight: 400;\"> that puts Side A ahead of every other payment.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Reinstatement of the Side A limit<\/b><span style=\"font-weight: 400;\"> after erosion by entity claims.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>A separate Side A DIC layer<\/b><span style=\"font-weight: 400;\"> that the company is not insured under.<\/span><\/li>\n<\/ul>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">Israeli companies listed in the United States, or preparing for an IPO, face higher class action exposure (see <\/span><a href=\"https:\/\/lamdabroking.com\/en\/directors-and-officers-liability-insurance-in-public-companies\/\"><span style=\"font-weight: 400;\">D&amp;O for publicly traded companies<\/span><\/a><span style=\"font-weight: 400;\"> and <\/span><a href=\"https:\/\/lamdabroking.com\/en\/insurance-for-the-nasdaq-ipo-process\/\"><span style=\"font-weight: 400;\">insurance for a Nasdaq IPO<\/span><\/a><span style=\"font-weight: 400;\">). Claims over statements about artificial intelligence, such as <\/span><a href=\"https:\/\/lamdabroking.com\/en\/ai-washing-do-insurance\/\"><span style=\"font-weight: 400;\">AI-washing claims<\/span><\/a><span style=\"font-weight: 400;\">, now frequently name board members as well.<\/span><\/p>\n<h2 dir=\"ltr\"><span style=\"font-weight: 400;\">Side A DIC: what the separate layer adds<\/span><\/h2>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">A Side A DIC (difference in conditions) policy is a standalone policy that protects only the insured persons and sits above the regular D&amp;O programme. It adds limit reserved for them, and it drops down when the layers below do not pay.<\/span><\/p>\n<ul dir=\"ltr\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Drop down:<\/b><span style=\"font-weight: 400;\"> pays when an underlying insurer refuses or becomes insolvent, and when the underlying limit is exhausted.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Broader terms (DIC):<\/b><span style=\"font-weight: 400;\"> fewer and narrower exclusions than the primary policy.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Non-rescindable:<\/b><span style=\"font-weight: 400;\"> the insurer gives up the right to void the policy for misrepresentation in the proposal.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Outside the estate:<\/b><span style=\"font-weight: 400;\"> because the company is not insured under it, US courts tend to treat the proceeds as belonging to the individuals rather than to the bankruptcy estate.<\/span><\/li>\n<\/ul>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">Primary forms have broadened in recent years. Some public company wordings replaced the insured versus insured exclusion with a narrow entity versus insured exclusion, or added cover where indemnification is wrongfully refused. The gap the DIC fills has narrowed, but its value in insolvency and in claims naming several individuals at once remains. A layer can also be restricted to directors outside management (independent directors liability), so that claims against management cannot erode it.<\/span><\/p>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">Part of the capacity for these layers in the Israeli market comes from Lloyd&#8217;s.<\/span><\/p>\n<h2 dir=\"ltr\"><span style=\"font-weight: 400;\">The questions a director should ask before signing<\/span><\/h2>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">Before joining, a director should ask for the full policy wording and the indemnification letter, and a certificate alone is not enough. The table lists the questions to put to the company and its broker, and the answers that justify a closer look.<\/span><\/p>\n<p dir=\"ltr\"><b>Questions to ask before joining a board:<\/b><\/p>\n<table dir=\"ltr\">\n<tbody>\n<tr>\n<td><b>Question<\/b><\/td>\n<td><b>Why it matters<\/b><\/td>\n<td><b>The answer that should raise a flag<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">What is the limit, and how is the tower built?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">A headline limit says little until you know who pays first<\/span><\/td>\n<td><span style=\"font-weight: 400;\">&#8216;One policy, one limit, no excess layers&#8217;<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Who else shares the limit?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">In a public company, Side C and claims against executives draw on the same money<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No priority of payments clause and no Side A reinstatement<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Has a Side A DIC policy been bought?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">A layer the company is not insured under preserves money for individuals<\/span><\/td>\n<td><span style=\"font-weight: 400;\">&#8216;We do not need it, you have an indemnification letter&#8217;<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">How is the insured versus insured exclusion worded?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">A claim by an insolvency trustee or a derivative claimant can fall into it<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No carve-back for derivative claims or insolvency office-holders<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">When does the conduct exclusion apply?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">An exclusion triggered by allegation lets the insurer stop funding the defence early<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No requirement for a final, non-appealable judgment<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">What is the continuity date?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">It decides which past circumstances remain covered<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Recently reset, or lost when the company changed insurer<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Is there severability and non-imputation?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">One executive&#8217;s knowledge or misstatement should not defeat an independent director&#8217;s cover<\/span><\/td>\n<td><span style=\"font-weight: 400;\">The CEO&#8217;s knowledge is imputed to all insureds<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Are regulatory investigations covered?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">An inquiry can run for years before any claim is made<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Cover only for formal proceedings, nothing for the inquiry stage<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">What does the indemnification letter say?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">It fixes the list of events and the cap<\/span><\/td>\n<td><span style=\"font-weight: 400;\">A generic event list and a cap far below the exposure<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">What happens when I leave, or the company is sold?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">The policy pays claims made during its period, including for old acts<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No commitment to cover former directors or to buy run-off on a change of control<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p dir=\"ltr\">\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">The broker (LAMDA Broking) and the director&#8217;s counsel review the policy wording and the indemnification letter side by side, because a mismatch between the two usually surfaces only when a claim arrives.<\/span><\/p>\n<h2 dir=\"ltr\"><span style=\"font-weight: 400;\">Fund-appointed directors: two policies, and the order that decides who pays<\/span><\/h2>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">A director appointed by a venture capital fund to a portfolio company board is usually protected from two directions: the portfolio company&#8217;s D&amp;O policy, and outside directorship liability cover under the fund&#8217;s policy. The fund cover normally pays only after the portfolio company&#8217;s indemnification and insurance are exhausted.<\/span><\/p>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">This double excess structure works well while the portfolio company is healthy. When it struggles, each policy may point to the other. Check whether the fund policy, often combined with general partners liability (GPL) cover, responds when the company refuses to indemnify. A second issue is the insured versus insured exclusion: a claim by the fund or another investor against the director can be caught in both policies.<\/span><\/p>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">At an early-stage startup the company policy is modest, so the fund cover carries more weight (<\/span><a href=\"https:\/\/lamdabroking.com\/en\/directors-insurance-for-startups\/\"><span style=\"font-weight: 400;\">D&amp;O for startups and technology companies<\/span><\/a><span style=\"font-weight: 400;\">).<\/span><\/p>\n<h2 dir=\"ltr\"><span style=\"font-weight: 400;\">Leaving the board or selling the company: who protects the director afterwards<\/span><\/h2>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">D&amp;O policies are written on a claims-made basis, so they pay for claims made while the policy is in force, even if the act took place years earlier. A former director is protected only while the company keeps buying a policy that covers past office holders.<\/span><\/p>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">On a change of control most policies stop covering acts after the transaction, and the acquired company typically buys run-off cover for several years (<\/span><a href=\"https:\/\/lamdabroking.com\/en\/runoff-vs-tail-coverage\/\"><span style=\"font-weight: 400;\">run-off vs tail coverage<\/span><\/a><span style=\"font-weight: 400;\">). An independent director should make sure the indemnification letter or the appointment agreement obliges the company to maintain that cover.<\/span><\/p>\n<h2 dir=\"ltr\"><span style=\"font-weight: 400;\">Israel, the US, Europe and Asia: what changes between legal systems<\/span><\/h2>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">The law that governs the company decides what may be indemnified, and therefore how much work is left for Side A. Israel and the US share the same basic structure, while Europe and Asia vary more.<\/span><\/p>\n<h3 dir=\"ltr\"><span style=\"font-weight: 400;\">United States<\/span><\/h3>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">Section 145(b) of the Delaware General Corporation Law limits indemnification in derivative suits to expenses, which makes a derivative settlement the classic non-indemnifiable loss. Section 145(g) allows the company to insure liabilities it could not indemnify. The SEC takes the position that indemnification for liabilities under the Securities Act of 1933 is against public policy. US directors joining an Israeli board tend to expect a Side A DIC layer and ask what happens to the cover in bankruptcy.<\/span><\/p>\n<h3 dir=\"ltr\"><span style=\"font-weight: 400;\">European Union and United Kingdom<\/span><\/h3>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">In the UK, section 232 of the Companies Act 2006 voids provisions exempting or indemnifying a director against liability to the company, and section 233 allows the company to buy insurance for the director. In Germany, D&amp;O cover for management board (Vorstand) members must carry a deductible of at least 10% of the loss, up to at least one and a half times fixed annual pay; there is no statutory requirement for supervisory board members. There is no harmonised EU regime for director indemnification.<\/span><\/p>\n<h3 dir=\"ltr\"><span style=\"font-weight: 400;\">Asia<\/span><\/h3>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">In Japan, a Companies Act amendment in force since 2021 requires a board resolution for D&amp;O insurance and disclosure by public companies. In China, the revised Company Law in force since July 2024 expressly recognises director liability insurance and requires reporting to the shareholders&#8217; meeting. Groups with Asian subsidiaries should check whether the master policy is recognised there.<\/span><\/p>\n<h2 dir=\"ltr\"><span style=\"font-weight: 400;\">Common mistakes<\/span><\/h2>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">Most mistakes are made before the appointment, while it is still easy to ask for documents and change terms. Experienced directors make them as often as new ones.<\/span><\/p>\n<ul dir=\"ltr\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Assuming an indemnification letter makes Side A unnecessary.<\/b><span style=\"font-weight: 400;\"> Indemnification depends on the company&#8217;s ability and willingness to pay, and both can disappear exactly when the claim is large.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Relying on the certificate.<\/b><span style=\"font-weight: 400;\"> It shows a limit and a period, and says nothing about exclusions or the order of payments.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Comparing quotes on <\/b><a href=\"https:\/\/lamdabroking.com\/en\/how-much-does-do-insurance-cost\/\"><b>price<\/b><\/a><b> alone.<\/b><span style=\"font-weight: 400;\"> Two wordings at the same premium can behave very differently in insolvency.<\/span><\/li>\n<\/ul>\n<h2 dir=\"ltr\"><span style=\"font-weight: 400;\">Frequently Asked Questions<\/span><\/h2>\n<h3 dir=\"ltr\"><span style=\"font-weight: 400;\">I am an independent director of a public company. Is the company&#8217;s D&amp;O policy enough for me?<\/span><\/h3>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">It may be, subject to the wording. Check whether the limit is shared with entity cover (Side C) and whether a priority of payments clause puts Side A first. A separate question is whether a Side A DIC layer has been bought. In a public company, a class action against the company can erode the limit before claims against directors are reached.<\/span><\/p>\n<h3 dir=\"ltr\"><span style=\"font-weight: 400;\">What is the difference between Side A and Side A DIC?<\/span><\/h3>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">Side A is an insuring agreement within the regular policy and usually shares its limit with the company&#8217;s cover. Side A DIC is a separate policy that protects individuals only, sits above the programme and drops down when an underlying insurer does not pay or the underlying limit is exhausted, typically on broader and non-rescindable terms.<\/span><\/p>\n<h3 dir=\"ltr\"><span style=\"font-weight: 400;\">Will the policy cover a monetary sanction imposed by the Israel Securities Authority?<\/span><\/h3>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">No. Section 56H of the Securities Law prohibits insuring an administrative proceeding and bars the company from paying a sanction imposed on someone else, and section 263 of the Companies Law excludes monetary sanctions and fines. The expenses of the proceeding and payments to the injured party may be insurable if the articles permit it and the policy expressly extends to administrative proceedings.<\/span><\/p>\n<h3 dir=\"ltr\"><span style=\"font-weight: 400;\">What happens to my cover if the company becomes insolvent?<\/span><\/h3>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">The company will almost certainly not indemnify, even under a valid letter, and the trustee may be the one suing the directors. Side A becomes the main source of defence funding, subject to the insured versus insured exclusion and whether it carves back claims by insolvency office-holders. In the US a standalone Side A policy tends to stay outside the bankruptcy estate.<\/span><\/p>\n<h3 dir=\"ltr\"><span style=\"font-weight: 400;\">I sit on a board on behalf of a fund. Which policy pays first?<\/span><\/h3>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">Usually the portfolio company&#8217;s policy and indemnification pay first, and the outside directorship cover under the fund policy pays only above them. Check whether the fund cover responds when the company refuses to indemnify, and whether a claim by the fund itself is caught by an insured versus insured exclusion in either policy.<\/span><\/p>\n<h3 dir=\"ltr\"><span style=\"font-weight: 400;\">I have left the board. Am I still covered?<\/span><\/h3>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">Only if the company keeps buying a policy that defines former office holders as insureds, because the policy pays claims made during its period. On a change of control it is common to buy run-off cover for several years, and the indemnification letter should oblige the company to maintain that cover after you leave.<\/span><\/p>\n<h3 dir=\"ltr\"><span style=\"font-weight: 400;\">Can an indemnification letter replace insurance?<\/span><\/h3>\n<p dir=\"ltr\"><span style=\"font-weight: 400;\">Not entirely. An indemnification letter is limited to the events and the cap written into it, and it depends on the company&#8217;s ability to pay. It also reaches only liability to third parties and expenses. Insurance can cover liability to the company itself for breach of the duty of care, and, subject to wording, it may remain available when the company is insolvent. The two complement each other.<\/span><\/p>\n<p dir=\"ltr\"><b>An independent director takes on personal liability on the day of joining, and the protection is set by the policy wording and the indemnification letter, both of which can be requested before signing.<\/b><\/p>\n<p dir=\"ltr\"><i><span style=\"font-weight: 400;\">The above is general information only and does not constitute insurance, legal or other professional advice. Coverage terms, exclusions and obligations are determined by the specific policy wording and subject to applicable law. Each case should be examined on its merits against the policy wording and with a qualified adviser.<\/span><\/i><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Side A pays a director when the company cannot or will not indemnify. 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