This recent article from Financier Worldwide is a useful reminder that D&O risks are rapidly evolving to include AI washing, geopolitical risk, cyber events and increased regulatory scrutiny. However, as an insurance litigation lawyer, what I tend to find is that when a claim lands the overarching question is whether the policy wording has kept pace.

D&O claims rarely fail because the insured didn't buy insurance - they fail because the policy wording does not operate as expected. All too often, organisations have treated D&O placement as a pricing exercise comparing limits and premiums when, in reality, D&O insurance should be purchased with one eye on the claim that keeps the directors awake at night.

Coverage outcomes are often determined by the policy small print: definitions of “claim” and “loss”, conduct exclusions, notification provisions, investigation costs cover and the extent of Side A protection.

In that respect, insurance brokers have a critical role to play. They should be challenging whether policy wordings properly address the policyholder's risk profile and whether the wording is fit for purpose. They should be explaining the practical effect of exclusions and coverage limitations, identifying any potential gaps in coverage before they become expensive problems whilst also ensuring that any emerging risks are considered during the placement process. 

Disputes over ambiguous wording, undisclosed exclusions and cover that doesn't match the policyholder's stated requirements are common, and D&O is a natural fault line, because D&O policies are often bespoke which means that protection depends entirely on precise drafting much of which is often not broad enough to address risks that simply didn't exist or have evolved since many D&O forms were first drafted.

The best brokers add real value because they understand the business well enough to negotiate policy wordings and to stress test those wordings against the client's risk profile.

If boards are now expected to demonstrate that AI, insolvency and geopolitical decisions were "properly informed, tested and documented," brokers should expect the same scrutiny of their file when a claim goes wrong. Good D&O cover starts with a good broker conversation — and a well-documented one.