Side A, B and C explained: who does your D&O policy protect?

The letters describe different routes to protection. Understanding who gets paid—and which limit pays—is more useful than memorizing the alphabet.

Key takeaways

• Side A addresses covered loss of individuals when company indemnification is unavailable; Side B reimburses covered indemnification by the company.[2]
• Side C covers the entity only for the claims specified in the contract.[1][2]
• Dedicated Side A/DIC can add protection for individuals outside shared ABC limits, but its own terms still matter.[3]

First, separate the individual from the company

A claim may name a director, an officer, the company, or a combination of defendants. D&O's A, B and C insuring agreements distinguish between protection for individual insureds and protection for the organization.[2] They are not three interchangeable labels for the same coverage.

Start a policy review with two questions: whose loss is involved, and is the company indemnifying that person? “Indemnifying” means the company is bearing qualifying costs on the individual's behalf. That distinction is central to understanding the first two sides.[2]

Side A: covered loss the company does not indemnify

Side A provides coverage for individual insureds' covered loss where indemnification from the company is unavailable.[2] Legal restrictions and financial insolvency are important reasons a company may be unable to indemnify.[5]

These are different situations. One concerns whether the company is legally permitted to provide indemnification; the other concerns whether it has the financial ability to do so. Have counsel assess the obligation and legal authority to indemnify rather than assuming the insurance policy resolves those questions.

A company's refusal to indemnify also requires careful reading. Do not assume every refusal automatically produces retention-free Side A coverage: presumptive-indemnification wording and related provisions can matter. Chubb, for example, specifically describes removing its traditional presumptive-indemnification clause to prevent individual insureds from being held responsible for significant retentions.[7] That is a product feature to examine, not a universal promise about every D&O policy.

Side B: reimbursement when the company indemnifies

Side B reimburses the company for covered amounts it pays to indemnify insured directors and officers.[2] It is balance-sheet protection for the company arising from a claim against an individual—not entity coverage for the company's own alleged wrongdoing.

In a hypothetical dispute, the company pays an insured officer's qualifying defense expenses. Side B is the part to examine for reimbursement, subject to the terms, retention and available limits. The example illustrates the payment route; it does not establish coverage for a real claim.

Retentions deserve their own comparison. Ask the broker to show the individual and corporate retention provisions side by side, including the treatment of failed indemnification. Do not assume the same amount applies to A, B and C; carrier wording can distinguish organization retentions from the treatment of individuals.[7]

Side C: defined protection for the entity

Side C addresses covered claims against the company itself.[2] For public companies, that protection is generally limited to securities claims; private-company entity coverage is often broader, but exclusions and other terms restrict its reach.[1][2]

“Entity coverage” does not mean insurance for all corporate liabilities. Ask which allegations, proceedings and insured entities the actual contract includes. Likewise, confirm employment practices, benefit-plan fiduciary and cyber protection separately rather than treating them as automatic extensions of Side C; management-liability products can offer optional coverage parts.[6]

Three agreements may draw on one pool

Do not read an ABC policy as three independent limits unless the contract actually provides them. Entity claims can reduce the coverage remaining for individuals, and defense spending commonly reduces the available D&O limit.[1][5]

This matters even when the allegations are contested. Review how expenses are allocated, who controls the defense, when insurer consent is required, and whether a priority-of-payments provision favors individuals. Marsh notes that such a provision is not equivalent to dedicated Side A limits.[1]

A useful exercise is to trace one hypothetical claim through the actual policy: the individual is named, the company is named, both retain counsel, and the company later experiences financial distress. Ask the advisor to identify the relevant agreements and unresolved wording questions at each stage.

Where standalone Side A/DIC fits

Dedicated Side A difference-in-conditions coverage is separate from the base policy's Side A agreement. It can provide additional limits for individual insureds and broader protection, including specified circumstances where an underlying insurer does not respond.[3]

It is not unconditional gap insurance. Ask which events permit it to respond below its usual excess position, what exclusions remain, and how the policy treats exhaustion of underlying limits. The label “DIC” is not a substitute for reviewing those provisions.

Your practical checklist

• Map each insuring agreement to the protected party.
• Compare retentions and indemnification provisions.
• Identify shared limits and defense-cost erosion.
• Review priority of payments and dedicated Side A options.
• Request a written explanation of any DIC response conditions.

Make the structure understandable

Contact Marc Kravitz, SterlingRisk, at mkravitz@sterlingrisk.com to discuss how your D&O program separates individual and company protection.

Educational information, not advice for a specific claim or insurance purchase. Actual policy wording, conditions, exclusions, facts and applicable law control coverage.