What are coverage layers?
If the typical high-tech company wanted to buy $15 million in D&O insurance, it is highly probable that no one insurer would provide all of that coverage at a reasonable rate. Insurers want to make sure that they don’t have too many eggs in one basket. They do so by declining to provide D&O policies with large policy amounts. If your company wants more insurance than the primary insurer will supply, you will need to buy “excess” layers of insurance. Excess D&O policies typically “follow form” – they have the same terms and conditions as the primary policy. The primary and excess policies together cover the same risk, and the effect of the layers is to allocate the risk among various insurers.
