Side A/B/C Coverage Clause
The Side A/B/C structure divides a D&O policy into three insuring agreements: direct personal protection for directors and officers without indemnification (Side A), reimbursement of indemnification payments made by the company (Side B), and standalone entity cover for claims against the company itself (Side C).
- Clause type
- Definition
- Origin/Market
- London Market (LMA/NMA/Lloyd’s)
- Favours
- Neutral
- Negotiability
- Negotiable
Purpose
D&O insurance protects three distinct economic interests that a single insuring clause could not properly capture. Side A ensures individual directors and officers remain personally protected even where the company is legally prohibited from indemnifying them or — for example in insolvency — is financially unable to do so. Side B reimburses the company for amounts it has already paid to indemnify its directors and officers. Side C covers claims brought directly against the company itself, for listed companies typically limited to securities claims.
Effect and limits
The three insuring agreements usually share a single aggregate limit tower, which can create competition for the same capacity when claims are brought against both individuals and the entity simultaneously. For this reason many companies purchase a standalone “Side A DIC” (difference in conditions) layer, reserved exclusively for directors and officers, carrying no retention and responding only where the underlying ABC policy fails to pay or pays insufficiently — for instance on insolvency of the primary insurer or where coverage is disputed.
Negotiation and practice
Programme design should address whether a separate Side A DIC layer is warranted, particularly for directors of listed or financially exposed companies. It is also important to consider the interaction with the insured versus insured exclusion and with the allocation clause, since both directly affect how far Side A protection actually extends in a dispute.