Column: Roger's Soapbox

Know Your Limitations

The insurance of directors and officers has been of the keenest interest to me since the mid-1990s. When I say “keenest interest,” don’t get me wrong: D&O is as dull as printing money can be. But I have followed the discipline since ACE arrived in Bermuda more than 20 years ago. They wrote it and I wrote about it.

I know Side A when I see it. I’ve saved time by assuming that Side B covers what Side A does not.

Yes, I’ve met people who insist there is a Side C, at weird insurance conventions in places you’ve never heard of, but I prefer to think of D&O like a single from the 1960s (a song stamped on heavy plastic and played on … never mind). Side A was the hit single; Side B the filler. There were double A-sides, but I stray further from the subject with every passing word.

I mention D&O because I have lately become a director of the company that manages the managers of the apartment block I live in. The protection D&O coverage offers is now literally of the keenest interest. I’ll tell you straight: writing about D&O is less stressful than having D&O written for you.

I know Side A when I see it. I’ve saved time by assuming that Side B covers what Side A does not.

As the finest director never to draw a salary, I have suddenly become aware of the true value of D&O insurance to the insured.

Potential claims loom on every horizon. A director oversaw something imperfectly done? He failed to oversee or foresee something imperfectly done? Something happened while he was on vacation in Mexico? The poor so-and-so is liable every time.

We have a leaseholder who sends incomprehensible writs against us that he has drafted himself, claiming money he hasn’t lost and distress he hasn’t suffered.

Another leaseholder wants it to be Florida in the corridor while the ice piles up outside. One especially nutty fellow is on his fifth Jaguar of the year. Curiously, he doesn’t drive.

As a director, I’m liable for all their woes, errors, crimes and misdemeanors.

A press release issued last month reported that directors are often unaware of the terms and conditions applicable to their coverage. They have little clue, it seems, about basic stuff, such as term and limits.

Poor fools, I thought. Then it struck me: I also have no clue what the terms and limits of my D&O policy might be.

Clint Eastwood, that great director (and, as ‘Dirty’ Harry Callahan, officer), once said: “A man’s got to know his limitations.” Coverage-wise, I don’t know mine. I know the premium has been paid and the policy is in force, but beyond that I can’t tell my Side A from my Hepatitis B.

How many insureds, I wonder, cruise along, thinking that our bottoms are covered, without ever bothering to read the small print, or even the large? We insureds aren’t too bright, apparently.

But here’s the thing, which you probably know if you work in insurance: We insureds don’t want to know the details. It’s not that we’re big-picture people. We’re more like Batman with his cowl on backwards.

For sake of argument, let’s say I’m protected by a three-year policy with a limit of $1 million for covered behavior. Knowing that, I would have to worry about what happens that might take place in four years’ time or cost more than a million bucks. The writs guy could have finished law school by then (and be putting on the writs).

To be honest — and I speak for insureds everywhere — not knowing is a much smoother experience for all of us.

Ignorance really is bliss.