Does D&O Cover Bankruptcy?

D&O can respond to claims against your directors and officers that arise from a bankruptcy, but it doesn't cover the bankruptcy itself or pay the company's unpaid debts. A trustee, receiver or creditor still has to allege a covered wrongful act against an insured.

Bankruptcy changes who sues and who controls the company. Check whether the insured-versus-insured exclusion carves out claims by a trustee, receiver or creditors; if it doesn't, those suits can be excluded. The Travelers specimen form counts a debtor-in-possession as part of the insured organization, which helps, but it doesn't mean every bankruptcy-related claim is covered.

Side A matters most here: it pays individual directors and officers when the company can't indemnify them, which is common once a company is insolvent. Side B only reimburses the company when it can indemnify, and Side C is limited to what its insuring agreement covers. Also check the bankruptcy and insolvency clause, the priority-of-payments clause, whether defense costs erode the limit, and notice deadlines.