Very soon after counsel is retained with respect to a new matter, counsel should discuss with the client whether there is potential insurance coverage and whether the appropriate insurers have been notified. This is true whether the new matter concerns a lawsuit, a threatened claim or a regulatory investigation or inquiry. But providing timely notice to the insurers is just the first step. There are a number of other issues that outside counsel should consider in order to protect the client’s right to advancement of defense costs under the client’s directors and officers (D&O) liability insurance policies.

Defense Obligations 101

Most insurance policies that provide coverage for defense costs include either a duty to defend clause or a duty to advance provision. Under New York law, and the law of most states, the duty to defend is broader than the duty to advance and is triggered whenever the allegations in a complaint fall within the scope of risks covered by the policy. However, while the duty to defend is broader, it also typically gives the insurer the right to control the defense and often to select defense counsel.

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