Large companies with strong financial conditions may opt to forgo purchasing Side B (coverage for claims made against directors or officers that are indemnified by the company) and Side C (coverage for claims made directly against a company) D&O coverages in favor of funding out-of-pocket losses they can legally indemnify. Corporations may prefer to pay these costs rather than face a rock-hard D&O insurance market and the seemingly “deny first and ask questions later” attitude of many claims handlers nowadays, or go through the hassle of creating a trust or other alternative arrangement for indemnification.

However, not all losses are legally indemnifiable. For example, pursuant to Delaware General Corporation Law, Section 145(b), corporations cannot provide indemnification to its directors or officers for breach of fiduciary duty suits brought derivatively. The frequent solution for even the largest companies that would otherwise be able to self-fund has been to purchase Side A D&O policies that provide coverage to these individuals for non-indemnifiable, but insurable, loss without the need to first satisfy any retention.