SPECIALTY LINES · 6 MIN READ

Management Liability: D&O, EPLI, and E&O

Public and private company D&O policies are built from three insuring agreements. Side A pays loss directly to directors and officers when the company cannot indemnify them - because law, bylaws, or insolvency bars it - and carries no retention. Side B reimburses the corporation for indemnification it pays on behalf of its directors and officers, subject to the entity retention. Side C covers the entity's own liability - for public companies, generally limited to securities claims. When a company lawfully indemnifies its directors in a securities class action, Side B responds. Side-A-only Difference-in-Conditions towers sit above the ABC program as a personal-asset backstop with broader terms. Continuity machinery polices claims-made coverage: the pending and prior litigation exclusion bars claims from proceedings pending before a stated date, the prior known facts exclusion bars claims from circumstances the insured knew before inception, and application misrepresentation can support rescission. Post-merger, run-off (tail) coverage - commonly a 6-year extended reporting period - covers pre-closing wrongful acts. EPLI covers employment claims - discrimination, harassment, retaliation - including third-party harassment claims by customers. Its most tested feature is the wage-and-hour treatment: back wages owed under the FLSA are viewed as uninsurable contract obligations, so standard EPLI excludes wage-hour claims and carriers instead offer a defense-cost-only sublimit, commonly $100,000 to $500,000 with $250,000 typical - no indemnity for back pay, liquidated damages, or penalties. Class action sublimits cap payout for claims seeking class or collective treatment regardless of certification, and the sublimit operates within the aggregate limit, not in addition to it, with defense costs eroding it. Professional liability (E&O) covers negligent acts, errors, and omissions in professional services. For insurance producers the paradigm claim is failure to procure: the agent fails to bind requested coverage, and damages are measured by what the client would have recovered under the unprocured policy. Innocent insured provisions preserve coverage for insureds who neither committed nor knew of another insured's fraud. Punitive damages are covered only where insurable by law - the federal due-process framework for punitive awards comes from the three BMW v. Gore guideposts (reprehensibility, ratio, comparable sanctions), with the conduct standard articulated in Restatement (Second) of Torts section 908. Tech E&O blends professional liability for technology services with cyber-style extensions, distinguished from pure cyber by its failure-to-perform trigger.