D&O coverage is usually triggered by a claim presented during the policy period because of a wrongful act that takes place after a designated retroactive date. A wrongful act is usually defined as:
Tip: If your policy is written on a "claims-made" basis, pay close attention to the retroactive (" retro" ) date. Claims arising from events before the retro date will not be covered.
- an act committed or wrongfully attempted
- an error
- an omission
- a misstatement
- a misleading statement
- neglect
- a breach of duty
Some D&O liability policies define a wrongful act to include employment-related offenses, such as wrongful termination, discrimination, harassment and violation of civil rights.
Timing is paramount in determining coverage. Three dates govern Directors' &Officers' coverage:
- The date of the original event, which must follow the policy's retroactive date.
- The policy's retroactive date, which must predate the occurrence.
- The date the claim is presented, which must fall within the policy term.
The retroactive date may be either the date the policy begins or an earlier date negotiated with the insurer.