The independent directors of Suga Ltd., suggested the management that the Company should take "independent director insurance" policy. However, the executive directors contended that the Company already had a 'Side A Ins

Director & Officer (D&O) insurance often covers all directors, officers and employees, as well as the company. This means that significant claims against the company and employees may deplete the limits available for individual officers and directors. The Company should determine if there are certain limits available only to directors and officers (often referred to as "Side A" or "Side A DIC" coverage) and whether your coverage contains a "priority of payments" clause that provides that in the event of claims against both the directors/ officers and the companies, losses attributable to the directors/officers are entitled to payment before losses of the company. Side A Insurance coverage is effectively the last line of defence against a director or officer having to pay their own costs related to a claim. It kicks in when the company is unable to provide indemnification (usually due to bankruptcy or a statutory prohibition on indemnification). Therefore, it is one of the most important coverages for individual directors and officers, as it directly protects against loss of personal assets as a result of claims. On the other hand, Independent Director Insurance provides a separate set of coverage limits dedicated solely to independent/outside directors of a company. Generally, if adequate Side A coverage is already in place, this coverage should not be necessary. In view of the above, a separate insurance policy for independent directors is preferable and therefore, the contention of the executive directors is not justified.