Pre-claim inquiry cover

Pre-claim inquiry cover is a D&O (directors and officers) extension that pays the costs of an executive summoned by an authority before any formal claim exists. Article L. 621-10 of the French Monetary and Financial Code allows investigators of the AMF (Autorité des marchés financiers, the French financial markets regulator) to summon and hear any person likely to provide them with information. An executive summoned in an investigation into the company's financial disclosure faces no claim: no statement of objections, no written demand, no wrongful act alleged against him. Under a D&O policy's definition of claim, the event therefore triggers nothing. Preparing for the hearing with a criminal defense lawyer and a securities counsel still quickly costs tens of thousands of euros. This cover fills that gap. The standard wording pays the reasonable costs of an insured responding to a formal request from an administrative, judicial or regulatory authority. It also pays for the response to a request from the company itself connected with such an investigation. The condition is that the request is not yet a claim. In the United States, the textbook example is a subpoena from the SEC (Securities and Exchange Commission) served on an executive in a formal investigation, before any Wells notice. The cover almost always carries a sublimit, and it leaves out routine inspections, industry-wide reviews unrelated to the insured and, often, the company's own costs. It works alongside regulatory investigation cover, which takes over once the person is targeted. It also works alongside the notice of circumstances: giving the insurer notice of the investigation ties to the current policy any claim it produces, perhaps two years later.