Bankruptcy – Shortly after an HMO filed for bankruptcy the court-appointed trustee seized the proceeds of the HMO's D&O policy, successfully arguing that the policy and its proceeds were assets of the estate. Since the policy had been purchased with corporate funds and provided full entity coverage, the court held that ALL of its proceeds should go to the numerous creditors. The directors and officers were left bare because there was no dedicated A-side limit available.

Excess Benefit Tax – The president of a hospital was given a personal loan of $500,000 at an interest rate of 2%. Because this loan is below market rate, he is required to notify the IRS of this Excess Benefit Transaction. He failed to both disclose this transaction and pay the taxes associated with it. The IRS imposed a penalty of 25% of the transaction against the president and 10% of the transaction to each board member who approved the transaction. The organization refused to indemnify those involved because they breached their fiduciary duty. (Coverage for Excess Benefit Tax can be added by endorsement.)

Primary Policy Is Rescinded – A regional health system suffered a suit which alleged unfair trade practices and monopolization. During the investigation it was established by the primary D&O carrier that the CEO and CFO of the health system manipulated the financials to hide kick-back payments to providers. The primary D&O carrier summarily rescinded the policy leaving the Directors and Officers without coverage. In such a scenario, the A-side DIC excess policy could drop down to become primary and provide coverage for “innocent” Directors and Officers.

EMTALA Fines – A patient came into the emergency room and needed immediate attention from a specialist. The Emergency Room physician paged the specialist on call, but he refused to come. He eventually relented but agreed to stabilize the patient only after he was given a promissory note for payment. The Health and Human Services Office of Inspector General fined both the Hospital and the physician. According to the by-laws the hospital did not have to indemnify the physician because he did not “act in good faith as an agent of the corporation.” The A-side DIC policy may provide coverage for EMTALA fines up to a maximum of $150,000.

Difference in Conditions – A non-profit clinic suffered an adverse medical malpractice judgment of nearly $3 million. Because the clinic carried only $2 million in coverage, it fell into bankruptcy. A benefactor sued the Directors and Officers for their failure to have proper insurance to cover the loss. The primary D&O policy had an exclusion for failure to maintain proper insurance. In this scenario, an A-side DIC excess policy could drop down to become primary and provide coverage because it doesn't contain such an exclusion.