1. Forms
2. MP
3. MP-00-08

What the form is

The MP 00 08 Executive Liability Side A Coverage Form is an insurance policy form developed by Insurance Services Office, Inc. (ISO). It provides specialized liability coverage for individual directors and officers of an organization. This is known as "Side A" coverage, which specifically applies when the company does not or is not permitted to indemnify its directors and officers for losses arising from claims alleging wrongful acts committed in their managerial capacity. Such situations can occur, for example, if the company is insolvent or if indemnification is legally prohibited (e.g., in certain shareholder derivative actions). The form operates on a claims-made basis, meaning coverage is triggered when a claim is first made against an insured during the policy period or an applicable extended reporting period. Importantly, the costs associated with defending against such claims are typically included within, and therefore reduce, the overall limit of liability available under the policy.

Classes of business it applies to

This form is generally designed for for-profit commercial entities. It is part of the broader ISO Management Protection Policy program, which offers various liability coverages for organizational management. Examples of businesses that would utilize this form include:

• Publicly traded corporations whose directors and officers face potential shareholder lawsuits.
• Large private companies seeking to protect the personal assets of their leadership.
• Companies in highly regulated industries or those undergoing significant corporate changes (e.g., mergers, acquisitions) where D&O risks are elevated.

A similar form, MP 00 09, is available for financial institutions.

Special considerations

• Claims-Made Basis: Coverage applies only if the claim for a wrongful act is first made against an insured person during the policy period or, if applicable, during an extended reporting period. The timing of the claim is crucial.
• Side A Specificity: This form is exclusively for non-indemnified losses of individual directors and officers. It does not cover the corporation itself or reimburse the corporation for indemnification it provides to its directors and officers (which would be Side B coverage).
• Defense Costs within Limits: Legal defense expenses erode the policy's limit of liability. This means that substantial defense costs can significantly reduce the funds available to pay for settlements or judgments.
• Retroactive Date: Policies are typically issued with a retroactive date. Wrongful acts that occurred before this date are generally not covered, even if the claim is made during the policy period.
• Severity Only: Side A coverage is often considered a crucial last line of defense for directors and officers, protecting their personal assets when the company cannot or will not step in.

Key information for agents and underwriters

• Risk Assessment: Underwriters will carefully evaluate the applicant company's financial stability, as insolvency is a key trigger for Side A claims. Other factors include the company's corporate governance practices, its litigation history, the industry in which it operates (some industries are more litigious than others), and the individual experience and reputation of its directors and officers.
• Pricing: Premiums are influenced by the desired limit of liability, the company's overall risk profile (including financial health and governance), its size and type, industry classification, and past claims experience.
• Potential Coverage Gaps: Since MP 00 08 only provides Side A coverage, agents should assess the need for other D&O coverages, such as Side B (company reimbursement for indemnified D&O losses) and Side C (entity coverage, often for securities claims). These coverages would be provided under different forms, such as MP 00 01 (Executive Liability Coverage Form) or MP 00 02 (Executive Liability and Entity Securities Liability Coverage Form).
• Indemnification Provisions: A thorough understanding of the company’s articles of incorporation and bylaws regarding indemnification of its directors and officers is essential for both agents and underwriters to determine the potential exposure under a Side A form.
• Exclusions: Agents should familiarize clients with standard D&O policy exclusions, which typically include matters such as illegal personal profiting, fraudulent or criminal acts, and claims related to acts committed prior to the retroactive date. Various endorsements may also be attached to the policy to modify its terms, add or remove exclusions, or comply with state-specific requirements.