Coverage Gap: What You Don’t Know About D&O Coverage May Cost You

As a director or officer of a financial institution, you understand all too well the risks involved. Any misstep, no matter how innocent, can lead to financial losses for a customer and charges of negligence directed at the institution, in general, and yourself, in particular.

Your bank’s directors and officers (D&O) insurance addresses a portion of this exposure, offering legal defense and settlement monies in the event of a civil suit. But did you know that D&O coverage is worthless in the event of a fine levied by a government regulatory agency? It is this gap in protection that civil money penalties insurance attempts to fill.

Nuts and Bolts of CMP Coverage

Civil money penalties insurance is purchased by the individual bank director or officer for his or her own protection and is a standalone policy separate from the institution’s D&O insurance.

Regulatory agencies include the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, the Office of the Comptroller of the Currency (OCC), National Credit Union Association (NCUA) or other comparable state or federal banking commissions.

In the event of a regulatory fine assessed to a bank-affiliated party, the CMP policy will pay the penalty up to the prescribed limits of the coverage—either $100,000 or $250,000.

Premiums are determined by the amount of coverage plus the desired deductible—which can be $0, $500 or $1,000.

Coverage does not include payment of legal fees.

Mistakes happen. Don’t compound one mistake with another by failing to fill this hole in coverage. Consult an experienced broker today about civil money penalties insurance.