Fines, penalties and staying out of jail

By: Susanne Murray, Executive Vice President, Alliant

While D&O insurance can’t actually help with jail time, such policies may provide a degree of fines or penalties coverage for directors and officers. D&O policies generally define Covered Loss as “damages, judgments, settlements and defense costs” with various other costs and expenses thrown in, such as pre- and post-judgment interest, punitive damages and plaintiff’s attorneys fees. The availability of coverage for different types of financial loss has evolved over time, with the most recent discussion surrounding fines and penalties.

The first step in this covered loss evolution was to extend coverage for defense costs incurred in claims seeking fines and penalties, though the fines and penalties were not themselves covered. In most policies, this still needs to be requested in the negotiations process. Foreign Corrupt Practices Act fines and penalties are also part of the D&O coverage discussion, and many insurers have extended coverage to certain types of FCPA fines and penalties, though coverage is not routinely extended to cover all fines and penalties under all sections of the FCPA. In some instances coverage is now available for a broader range of fines and penalties, subject only to insurability. The scope of covered loss continues to expand and is well worth attention.