Directors and Officers Liability Insurance

In the world of Directors & Officers (D&O) insurance, the “Sides” refer to the different ways the policy pays out depending on who is being sued and whether

the company is able to pay the legal bills.

Understanding these is vital for your clients at Madrona Insurance, as it explains exactly how their personal assets—like their homes or savings—are shielded.

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Side A: Personal Protection (The “Deed” to the House)

Side A is the most critical part for an individual director or officer. It provides direct coverage to the individual when the company cannot or will not pay for their defense or settlements.

When it kicks in: Typically if the company is insolvent (bankruptcy) or if the law prevents the company from indemnifying the director (certain derivative suits).
Why it matters: This is the “last line of defense” that protects a leader’s personal bank account and property.

Side B: Corporate Reimbursement

Side B is the most common way claims are handled. It reimburses the company after the company has paid to defend its directors and officers.

When it kicks in: When the company is financially stable and legally allowed to pay for the directors’ legal fees.
Why it matters: It protects the company’s balance sheet and cash flow by “refilling” the money spent on legal defense.

Side C: Entity Coverage

Side C covers the company itself when it is named as a defendant in a lawsuit alongside the directors.

For-Profit Companies: Usually only covers “Securities Claims” (lawsuits regarding stock price or investor relations).
Non-Profit Companies: Often broader, covering the entity for various types of lawsuits, which is a major selling point for your non-profit clients.

The “New” Side: Side D (Investigation Costs)

Some modern policies, especially in 2026, include or offer Side D.

What it covers: The costs associated with a formal investigation by a regulatory body (like the SEC or state insurance departments) before a lawsuit is even filed.
Why it matters: Investigations can be just as expensive as trials; Side D helps cover the legal and accounting fees required to respond to subpoenas.

Madrona Insurance “Expert Tip” for your site:

When you are explaining this to board members, you can use this simple analogy:

“Side B protects the company’s wallet. Side A protects your family’s home. At Madrona Insurance, we ensure both are locked tight.”

D&O Coverage: The "Sides" Explained

Why do people talk about "Sides" in D&O insurance?

D&O insurance is unique because it can pay out to different people for different reasons. We categorize these into "Sides" (A, B, and C) to define exactly who is being protected: the individual leader, the company's bank account, or the organization as a whole.

What is Side A, and why is it called "Personal Asset Protection"?

Side A is the most important coverage for you as an individual. It pays your legal defense costs and settlements when the organization cannot pay them for you—such as during bankruptcy or certain legal restrictions.

It is the wall that stands between a lawsuit and your personal savings, home, and retirement accounts.

My company has a "Hold Harmless" agreement. Do I still need Side A?

Yes. While your company may promise to "hold you harmless" (indemnify you), that promise is only as good as the company’s bank account. If the company goes insolvent or is legally barred from paying, your "Hold Harmless" agreement becomes just a piece of paper. Side A provides the cash to defend you when the company can't.

How does Side B differ from Side A?

Side B is "Corporate Reimbursement." Most of the time, your company will pay for your legal defense. When they do, Side B kicks in to pay the company back. This protects the company’s cash flow and balance sheet from being drained by expensive litigation.

What is Side C (Entity Coverage), and do I need it?

Side C protects the organization itself when it is named in a lawsuit alongside you.

For Non-Profits: This is usually broad and covers many types of claims.
For Private/Public Firms: This is typically limited to "Securities Claims" (investor lawsuits).

At Madrona Insurance, we help you determine the right level of Entity Coverage based on your specific industry.

Can I buy just one "Side," or do I have to buy all of them?

Most standard D&O policies are "ABC policies," meaning they include all three. However, for high-level directors, we often recommend an additional "Side A Only" policy. This provides a dedicated bucket of money that only protects the individuals and cannot be drained by the company’s own legal expenses.