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Forum Releases Paper on D&O Insurance for Fund Directors

The Mutual Fund Directors Forum released an extensive new paper titled Practical Guidance on Director and Officer Insurance for Fund Independent Directors. The paper is designed to be a resource for fund independent directors to build their knowledge of director and officer insurance and indemnification and related topics.

“The economic crises and scandals over the last three decades resulted in increased litigation and regulation of the financial industry,” said Susan Wyderko, President and CEO of the Mutual Fund Directors Forum.  “The costs of investigations, examinations, trials, settlements, judgments, and penalties can be staggering,” she continued.  “Our goal with this report is to provide directors with a framework to think about how to insure against these costs.”

The paper has four main sections, which outline the basic principles of indemnification, advancement of expenses, director and officer and errors and omission insurance and cybersecurity insurance. It also familiarizes directors with D&O policy terms and provisions; provides guidance on how directors can engage with counsel, fund management and insurance brokers during the negotiating and policy renewal process, and discusses emerging and common points of dispute with insurers.

“While a fund independent director’s risk of being personally sued or targeted by regulators has been historically low, fund directors still wish to be well informed about how indemnification and insurance protect them from personal liability. Having a solid knowledge base in these areas will give directors confidence to engage intelligently with counsel and management and as they carry out their fund oversight responsibilities,” added Joanne Skerrett, Counsel with the Mutual Fund Directors Forum.