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🏢 '''Side B coverage''' is the portion of a [[Definition:Directors and officers liability insurance (D&O) | directors and officers (D&O) liability insurance]] policy that reimburses the company itself when it indemnifies its directors and officers for covered [[Definition:Claim | claims]]. When a lawsuit names an individual executive and the corporation steps in to pay [[Definition:Defense costs | defense costs]] or a [[Definition:Settlement | settlement]] on that person's behalf — as most corporate bylaws and state statutes permit or require — Side B shifts that financial burden from the company's balance sheet to the [[Definition:Insurance carrier | insurer]].

🔄 The mechanics are straightforward: the company [[Definition:Indemnification | indemnifies]] the individual, then seeks reimbursement from the D&O insurer under Side B. The coverage typically shares a single [[Definition:Limit of liability | policy limit]] with [[Definition:Side A coverage | Side A]] and [[Definition:Side C coverage | Side C]] in a combined program, which means entity-level payments under Side B (and Side C) can erode the limit available to protect individual directors under Side A. To manage this risk, many companies carve out a dedicated [[Definition:Side A coverage | Side A]] excess or [[Definition:Difference in conditions (DIC) | DIC]] tower that cannot be reached by Side B or C claims. A [[Definition:Self-insured retention (SIR) | self-insured retention]] usually applies to Side B, reflecting the expectation that the company will absorb a baseline level of indemnification expense before insurance responds.

📊 Side B coverage is especially valuable to companies facing frequent [[Definition:Securities litigation | securities litigation]], [[Definition:Regulatory investigation | regulatory investigations]], or [[Definition:Employment practices liability | employment-related claims]] against their leadership. Without it, the cost of defending and indemnifying executives could materially affect [[Definition:Earnings | earnings]] and [[Definition:Cash flow | cash flow]]. [[Definition:Underwriting | Underwriters]] evaluate corporate governance quality, historical claim frequency, industry risk, and the breadth of the company's indemnification obligations when pricing this component. As D&O market conditions tighten — particularly after waves of [[Definition:Event-driven litigation | event-driven litigation]] — Side B retentions often increase, requiring companies to hold more risk before the policy pays, which makes informed program structuring essential.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Side A coverage]]
* [[Definition:Side C coverage]]
* [[Definition:Directors and officers liability insurance (D&O)]]
* [[Definition:Indemnification]]
* [[Definition:Self-insured retention (SIR)]]
* [[Definition:Defense costs]]
{{Div col end}}

Definition:Side B coverage - Revision history

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