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1. Fill coverage holes

Have you purchased the full spectrum of insurance policies for your company's risks?

First-party property, third party, directors and officers liability, errors and omission, crime, cyber and others should be considered. If you have not purchased insurance to cover each of these relevant risks, you must recognize that you may be self-insuring against these risks.

For example, a recent potential hole in insurance coverage has occurred in “phishing scams,” in which an e-mail that appears to come from a trusted source directs someone in accounting to send money outside your company (this is also known as “social engineering”). Sometimes the accounting person voluntarily complies before learning that the request was a scam.

That type of claim — which happens more often than you think — most closely resembles something that might be insured under a crime policy; however, carriers often will deny these claims because the funds were voluntarily given away by the insured and not “stolen” in the more traditional definition of that term.

Given all of the litigation that these denials of coverage have caused, the insurance market has come up with a new solution: the addition of a “social engineering” endorsement to your crime policy, for an additional premium. Because this new endorsement has become available on the market, the sublimits available for social engineering coverage have climbed, with excess carriers sometimes now willing to include it in their policies.

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2. Cover all entities

Do you have insurance for all of the entities you mean to insure under your policy?

For complex corporate families, this is particularly important. I especially see mistakes following an acquisition or corporate reorganization when the policyholder does not promptly address the reorganization in their existing policies.

Policies must be immediately updated to reflect the new entities or when there is a break in the corporate subsidiary relationship, such as in cases in which the parent-named insured no longer owns 50% of a subsidiary (or more likely a subsidiary of subsidiary), but still intends to insure that entity in its insur-ance program.

This can be even more problematic in a General Liability policy that does not have a broad form named-insured endorsement included that would automatically pick up all subsidiaries and newly formed entities, including limited liability companies, without the need to alert the insurer.

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3. Watch change of protocols

If your company has been involved in recent corporate deals, have you checked your change-of-control provisions in all management liability policies? To the extent a change in control has occurred, often the policy automatically goes into run-off, and new go-forward coverage must be bound at or within a short time after the time of the closing of the corporate transaction.

I've seen situations in which the policyholder did not realize that the change-in-control provision automatically put the policy into run-off, and no new go-forward coverage was secured. Even though a tail may have been placed at the end of the regular policy period, that doesn't provide the policyholder with go-forward coverage, such that the policyholder may be found to have a gap in coverage for the remainder of that policy period.

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4. Ensure all excess policies follow form

Does your entire tower of liability coverage follow form? Big problems arise when you have excess policies in your tower of liability coverage that do not exactly follow form.

For example, do you have an excess liability policy with its own dispute resolution provision that requires a Bermuda arbitration (when such a provision does not exist in the rest of your tower)? Do you have a different “shaving of limits” provision in your various excess liability policies requiring different thresholds for how coverage is triggered? Does your entire tower of liability coverage contain either a duty to defend or an obligation to reimburse defense costs?

Make sure your insurance tower does not contain potential gaps in coverage in which your excess layers do not follow form closely to the primary and umbrella coverages below it.

Angela R. Elbert is a partner with Neal, Gerber & Eisenberg LLP in Chicago. E-mail her at [email protected].