What does Priority of Payments Provision mean? Read on to discover the definition & meaning of the term Priority of Payments Provision - to help you better understand the language used in insurance policies.
Priority of Payments Provision
A provision found within most, but not all, directors and officers (D&O) liability insurance policies that sets forth the order in which policy proceeds will be paid out to the various insureds under the policy. The provision also states that policy proceeds are the property of the directors and officers, rather than a bankruptcy trustee. Priority of payments provisions were added to D&O policies because in the early 2000s, numerous controversies began to arise as to whether the proceeds of a D&O policy belong to a bankruptcy trustee or to the individual insured directors and officers.
We hope the you have a better understanding of the meaning of Priority of Payments Provision.