D&O Insurance: Side A, Side B and Side C Cover Explained

Directors’ and officers’ (D&O) insurance looks like a single product on the quote schedule, but under the bonnet most policies are built from three separate insuring clauses, usually labelled Side A, Side B and Side C. Each side protects a different party, responds in a different situation and interacts with the others in ways that only become obvious once a claim arrives. Understanding the three sides is the single most useful piece of D&O literacy a board can have, because it explains who the policy is really for — and it is not always the company that pays the premium.

Side A: cover for the individual directors

Side A is the personal heart of the policy. It pays defence costs, and where covered, awards and settlements, directly on behalf of an individual director or officer when the company cannot indemnify them or will not do so. The classic triggers are company insolvency — there is no money left to stand behind the director — and situations where the company is legally prevented from indemnifying, or simply refuses. Because Side A responds when the individual is on their own, it is the part of the policy that protects personal assets: the family home, savings and future earnings that are otherwise exposed to defence costs and, in some cases, personal liability.

Side A typically carries no retention (excess) for the individual, on the logic that a director abandoned by their company should not have to fund the first slice of their own defence. Some insurance programmes add dedicated Side A layers on top of the main policy so that individuals have a pot of cover the company can never erode — whether that is worthwhile depends on the company’s size and risk profile, and is a conversation to have with a broker rather than a default.

Side B: reimbursing the company

Most UK companies’ articles, and many service agreements, allow or oblige the company to indemnify directors for the costs of defending claims arising from their role, so far as the law permits. When the company does step in and pay, Side B reimburses the company for that outlay. The individual director may never see the insurer at all: the company funds the defence, then recovers under the policy, usually after a retention that the company bears itself.

In day-to-day claims against solvent companies, Side B is the clause that does most of the work. The distinction from Side A is invisible right up until the company cannot pay — at which point it becomes the whole ballgame, which is why the two sides are worth understanding together rather than as interchangeable jargon.

Side C: cover for the company itself

Side A and Side B both ultimately protect individuals; the company is either bypassed or reimbursed. Side C is different: it insures the corporate entity in its own name. For listed companies, Side C is usually confined to securities claims — actions by shareholders alleging losses connected with the company’s shares or market disclosures. It generally does not turn a listed company’s D&O policy into general liability cover for the business.

For private limited companies the picture is different again. Standalone entity cover under a traditional D&O policy is less common; instead, many private companies buy a management liability package, which combines directors’ and officers’ cover with corporate legal liability, and often employment practices liability, in one policy. If your business is private and you want the company itself protected as well as its directors, a management liability wording is usually the more natural home for that cover. The scope of any entity cover varies significantly between wordings, so the policy documents — not the product name — are what matter.

Why the distinction matters at claim time

When a claim or investigation lands, the first practical questions are: who is being pursued, who is paying the defence costs, and which insuring clause responds? The answers drive the retention that applies, who deals with the insurer, and how the available limit is used. A director facing a regulatory investigation personally, with a company unwilling to fund the defence, is in Side A territory with no retention. The same underlying facts, with the company indemnifying, become a Side B claim with the company bearing a retention. If the entity itself is also sued, Side C may be engaged too — and that is where the sharing of limits starts to bite.

As an illustrative scenario only: imagine a company and two of its directors are all named in the same action. The company’s own defence (Side C, if covered), its reimbursement for indemnifying the directors (Side B) and any unindemnified director’s costs (Side A) will usually all draw on one shared aggregate limit. If the corporate defence consumes most of that limit early, the individuals can find the cover that was meant to protect their personal assets substantially depleted by the time they need it.

How limits are shared across the sides

Most D&O policies are written with a single aggregate limit of indemnity for the policy period, shared across Side A, Side B and Side C and across all insured persons. The policy usually sets an order of payments clause stating that individuals’ Side A claims are prioritised over corporate reimbursement, but a priority rule is not the same as a separate pot: money spent is money gone. This is the argument for thinking carefully about limit adequacy where entity cover is included, and for considering ring-fenced Side A cover in larger or higher-risk programmes. There is no universal right answer — the appropriate structure depends on the company, and wordings differ on how limits, retentions and priority of payments operate, so the current policy documents always govern.

What this means when you buy or renew

Treat the three sides as a checklist. Do the individuals have unretained cover if the company fails or turns hostile? Does the company recover its indemnification spend? Is the entity itself covered, and if so for what — and is that better delivered through a management liability package? Apex Insurance Brokers is an independent, Bristol-based broker authorised and regulated by the Financial Conduct Authority, and we spend a lot of time translating these clauses into plain answers for boards. If you are unsure which sides your current policy actually contains, that is a five-minute conversation worth having before a claim makes it urgent.

Frequently asked questions

Does every D&O policy include all three sides?

No. Some policies are Side A only, some private-company wordings blend entity cover into a management liability package, and the breadth of Side C varies considerably. The declarations page and insuring clauses of your own policy are the only reliable guide, and wordings vary between insurers.

Who is actually insured under Side A?

Typically current, past and future directors and officers of the policyholder and its subsidiaries, and often others in managerial roles, as defined by the policy. The definition of “insured person” differs between wordings, so anyone relying on the cover — including non-executives — should check they fall within it.

If the company pays the premium, is the cover really for the directors?

Largely, yes. Sides A and B exist to protect individuals, either directly or by reimbursing the company that indemnifies them. Only Side C protects the corporate balance sheet in its own right, and for listed companies that is usually limited to securities claims.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy; wordings vary and your current policy documents govern what is and is not covered.