Insurance For A Derivative Lawsuit Explained- What is a Derivative Lawsuit?
A derivative lawsuit is brought by one or more stakeholders and/or employees, on behalf of the corporation, alleging financial loss to the organization. The alleged harm must be to the corporation as a whole, such as the diminishing of the corporation’s assets, for shareholders to pursue an action derivatively. Any recovery in such suits inures to the benefit of the corporation itself as opposed to the shareholders who institute the action.
Is there insurance for a Derivative Lawsuit?
Entity coverage or what’s commonly referred to as Side C coverage affords direct coverage of the insured organization under a directors and officers liability policy. Typically, corporate directors & officers forms only reimburse the insured organization when it is legally obligated to indemnify corporate officers and directors for their acts on behalf of the organization. However, if a lawsuit specifically names the insured organization as a defendant, some directors & officers insurance policies do not provide coverage. Entity coverage, under directors & officers policies is designed to cover the organization directly in addition to its directors and officers. A number of corporate directors & officers forms will and/or can now provide entity coverage and you should speak to an ALIGNED Insurance Advocate about whether or not this coverage is included in your policy or not
To discuss derivative lawsuit insurance, entity coverage and/or directors & officers insurance further, connect with an ALIGNED Advocate today.
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