Independent directors' liability (IDL)
A liability policy reserved for non-executive directors, with its own limit, so that they do not share cover with executives who are more exposed than they are.
In a classic directors' liability policy, all insureds share the same limit: executives, the company for certain litigation, and independent directors. Yet the latter, who have neither day-to-day management nor full access to information, are generally the least responsible for mismanagement, but they can see the limit exhausted by the defense and judgments of executives, or by the company's cover. A policy dedicated to independent directors reserves a limit for them alone, often on a difference in conditions basis above the main program, which nobody else can consume. It generally carries fewer exclusions, a strict severability clause, and applies even when the main policy is rescinded, denied or exhausted. For a company, it is also a recruitment argument: a competent independent director will refuse to serve without assurance that its protection will not depend on the conduct of the executives it is meant to oversee. For the underwriter, the risk is lower per head but concentrated in extreme situations, insolvency and management fraud.
Textbook case: a struggling company has a 30 million euro program fully consumed by the defense of its chief executive and chief financial officer. Its four independent directors, sued in turn by creditors, remain protected by a dedicated 10 million policy that responds to them alone.
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