Who is this post for? If you are an officer or director of a crypto firm, or a firm with significant exposure to the losses of a crypto firm, and if you’re concerned about your personal assets being subject to claims from investors and accompanying legal defense costs, then this FAQ is for you.
Who is covered by a D&O policy? The policy typically covers the company, and its directors, officers, and sometimes employees.
What if the crypto firm is in bankruptcy, am I still covered? Yes. “Side A” D&O coverage protects individual insureds when the company cannot indemnify them due to insolvency.
What kind of claims are covered by D&O insurance? Claims asserting a “wrongful act” are typically covered. The term “wrongful act” is usually broadly defined to include almost any act, error or omission in the conduct of the company’s business.
Do D&O policies exclude “dishonest conduct”? Most D&O policies contain exclusions for dishonest, fraudulent or criminal conduct. But most such policies also include severability clauses, which provide that the wrongful acts of one director or officer will not be imputed to others. Most D&O policies further provide that an insured will still be entitled to coverage until there is a final adjudication of excluded dishonest conduct in the underlying lawsuit. Because defense costs can mount quickly, and because many claims against directors or officers settle short of a final court ruling, this is important protection for your personal assets.
What kinds of costs and expenses are covered? Can I get attorneys’ fees? D&O policies provide indemnity for defense costs, settlements, and judgments. The fees and expenses of your attorneys are covered defense costs.
I’ve heard people say you have to “act fast” to assert a D&O claim. Why is that? D&O policies usually require that notice of a claim to the insurer be made during the policy period or within a limited period after the policy ends. Failing to give timely notice can mean forfeiting your insurance claim. Additionally, the finite liability limits of D&O policies are typically paid as coverage claims come in and as expenses are incurred in defense and resolution of underlying lawsuits; those limits could be exhausted by other, earlier claims.
What do I have to do to make a claim for insurance coverage? Nobody at the crypto firm is replying to my emails. The first step is to identify your company’s D&O insurer(s), and ideally obtain a copy of the policy, which will provide the contact information to submit a claim, or a notice of circumstances that may give rise to a claim. This information may be in a board package that was given to you when you joined as a board member or was part of your employment package when you joined as an officer.
Do I need a lawyer to make a claim for insurance that covers legal fees? There are law firms, like Covington, that specialize in asserting claims against D&O insurance carriers on behalf of the company and its directors and officers. They can also help you find the policy information when none is forthcoming from the company. If you would like to speak to one of our experts on D&O insurance coverage, please call or email Georgia Kazakis, John Buchanan, Ralph Muoio or Scott Levitt.