What Does Presumptive Indemnification Provision Mean?

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What does Presumptive Indemnification Provision mean? Read on to discover the definition & meaning of the term Presumptive Indemnification Provision - to help you better understand the language used in insurance policies.

Presumptive Indemnification Provision

Presumptive Indemnification Provision

A clause found in most directors and officers (D&O) policies, stating that, in a claim situation, it is presumed that the corporate organization has indemnified its directors and officers to the fullest extent permitted by law, regardless of whether the corporation does, in fact, indemnify the directors and officers. The provision is significant because the typical D&O policy includes a substantial self-insured retention (SIR) for corporate reimbursement (Side B) coverage but no retention for "direct" (Side A) D&O coverage. At one time, corporations attempted to avoid paying the Side B retention by simply electing not to indemnify the insured directors and officers, forcing the insurer to provide first dollar coverage for the directors and officers. To prevent this, D&O insurers began to insert presumptive indemnification provisions within their forms.

We hope the you have a better understanding of the meaning of Presumptive Indemnification Provision.

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