The scope of coverage afforded under D&O and other types of policies is determined based not only on the terms and conditions of the policy, but also on the law applicable to the policy. Brokers and insureds correctly devote a lot of time and effort into negotiating the most desirable policy terms, but too often fail to similarly address the important question of what law will apply when interpreting and enforcing the policy.
The discussion below addresses the importance of state law to an insurance policy, how D&O policies have historically treated choice-of-law issues, what the benefits of an express choice-of-law provision in the policy are, and alternative approaches to the choice-of-law issue in today’s complex D&O insurance program structure.