Study guide
15.4 Directors & Officers and Employment Practices Liability
Arkansas Property & Casualty Insurance State
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1 Standalone Coverage Map
Standalone Coverage Map
2 Introduction: Arkansas Property & Casualty Insurance Exam Overview
Arkansas Property & Casualty Exam Overview
3 National Portion: Insurance Fundamentals
1.1 Risk, Hazards, Perils, and the Law of Large Numbers 1.2 Insurable Interest, Indemnity, and Other Insurance Principles 1.3 Insurance Contract Law and Elements 1.4 Policy Structure: Declarations, Insuring Agreement, Conditions, Exclusions 1.5 Parties, Agents vs. Brokers, and Authority
4 National Portion: Property Insurance Concepts
2.1 Causes of Loss / Named-Peril vs. Open-Peril 2.2 Valuation: ACV, Replacement Cost, and Functional Value 2.3 Coinsurance and the Coinsurance Formula 2.4 Deductibles, Limits, and Loss Settlement 2.5 Common Property Policy Conditions and Clauses
5 National Portion: Dwelling Policies (DP)
3.1 Dwelling Policy Forms DP-1, DP-2, DP-3 3.2 Dwelling Coverages A-E and Other Coverages 3.3 Dwelling Perils, Conditions, and Endorsements 3.4 Mobile Home and Specialized Dwelling Coverage
6 National Portion: Homeowners Policies - Forms & Section I
4.1 Homeowners Forms HO-2 through HO-8 and Eligibility 4.2 Section I Coverages A-D and Additional Coverages 4.3 Section I Perils Insured Against and Exclusions 4.4 Replacement Cost vs. ACV and Loss Settlement in Homeowners
7 National Portion: Homeowners Policies - Section II & Endorsements
5.1 Section II Coverages E (Liability) and F (Medical Payments) 5.2 Homeowners Conditions and Duties After Loss 5.3 Common Homeowners Endorsements (scheduled property, water backup, ordinance or law)
8 National Portion: Personal Auto Policy - Liability & Injury
6.1 Personal Auto Policy Structure and Eligibility 6.2 Part A Liability and Supplementary Payments 6.3 Part B Medical Payments 6.4 Part C Uninsured/Underinsured Motorists
9 National Portion: Personal Auto Policy - Physical Damage & Duties
7.1 Part D: Coverage for Damage to Your Auto 7.2 Exclusions and Part E: Duties After an Accident 7.3 Part F: General Provisions, Endorsements, and No-Fault Concepts
10 National Portion: Liability Insurance Concepts
8.1 Negligence, Torts, and Legal Liability 8.2 Defenses, Damages, and Vicarious Liability 8.3 Occurrence vs. Claims-Made Triggers 8.4 Bodily Injury, Property Damage, and Personal/Advertising Injury
11 National Portion: Commercial Property Insurance
9.1 Commercial Package Policy Structure and Common Policy Conditions 9.2 Building and Personal Property Coverage Form (BPP) 9.3 Causes of Loss Forms (Basic, Broad, Special) 9.4 Business Income and Extra Expense 9.5 Commercial Property Endorsements and the BOP
12 National Portion: Commercial General Liability - Coverages
10.1 CGL Coverage A: Bodily Injury and Property Damage Liability 10.2 CGL Coverage B: Personal and Advertising Injury, Coverage C: Medical Payments 10.3 Who Is an Insured and Supplementary Payments
13 National Portion: Commercial General Liability - Limits, Triggers & Exclusions
11.1 CGL Limits of Insurance and Aggregates 11.2 Occurrence vs. Claims-Made CGL and Retroactive Dates 11.3 Key CGL Exclusions and Endorsements
14 National Portion: Commercial Auto Insurance
12.1 Business Auto Coverage Form and Covered Auto Symbols 12.2 Commercial Auto Liability and Physical Damage 12.3 Motor Carrier / Trucking and MCS-90 12.4 Garage Coverage Form and Garagekeepers 12.5 Commercial Auto Endorsements
15 National Portion: Workers Compensation
13.1 Workers Compensation Statutory Background and Benefits 13.2 Part One (Workers Comp) and Part Two (Employers Liability) 13.3 Premium Basis, Experience Modification, and Classification 13.4 Other States, USL&H, and Federal Acts 13.5 Workers Comp Exclusions and Endorsements
16 National Portion: Other Commercial Lines - BOP, Crime & Marine
14.1 Businessowners Policy (BOP) in Depth 14.2 Crime and Fidelity Coverage 14.3 Inland Marine and Nationwide Marine Definition 14.4 Ocean Marine Coverages (Hull, Cargo, Freight, P&I)
17 National Portion: Other Commercial Lines - Specialty & Professional
15.1 Farm and Agricultural Coverage 15.2 Commercial Umbrella and Excess Liability 15.3 Professional Liability and Errors & Omissions 15.4 Directors & Officers and Employment Practices Liability
18 National Portion: Other Commercial Lines - Surety, Flood & Specialty
16.1 Surety and Fidelity Bonds 16.2 National Flood Insurance Program (NFIP) 16.3 Cyber, Aviation, and Other Specialty Lines
19 National Portion: Insurance Regulation & Market Conduct
17.1 State Regulation, Licensing, and the McCarran-Ferguson Act 17.2 Rates, Forms, Solvency, and Guaranty Associations 17.3 Producer Authority, Fiduciary Duty, and Company Operations
20 National Portion: Ethics & Unfair Trade Practices
18.1 Unfair Trade Practices and Unfair Claims Settlement 18.2 Producer Ethics, Errors & Omissions Exposure, and Fiduciary Conduct 18.3 Privacy, Fraud, and Consumer Protection
21 Chapter 1: Arkansas P&C Insurance Regulation & Licensing
1.1 Arkansas Insurance Department 1.2 Arkansas P&C Producer Licensing Requirements 1.3 Arkansas Producer Responsibilities
22 Chapter 2: Arkansas Property Insurance
2.1 Arkansas Homeowners Insurance 2.2 Arkansas Commercial Property Insurance
23 Chapter 3: Arkansas Casualty & Auto Insurance
3.1 Arkansas Auto Insurance Requirements 3.2 Arkansas Liability Insurance 3.3 Arkansas Workers' Compensation Insurance
24 Chapter 4: Arkansas Ethics & Professional Conduct
4.1 Ethical Practices and Consumer Protection
15.4 Directors & Officers and Employment Practices Liability
Key Takeaways Explain This Topic AI
D&O protects executives against claims-made wrongful-act allegations (fiduciary breach, mismanagement) that the CGL excludes.
D&O has three sides: Side A (non-indemnified individuals), Side B (reimburses the company), Side C (entity's own liability, usually securities for public firms).
Retentions typically apply to D&O Sides B and C but not Side A, protecting executives' personal assets.
EPLI covers discrimination, harassment, wrongful termination, and retaliation - filling the gap between the CGL and workers compensation.
Management-liability policies use annual aggregate limits with defense-within-limits and per-claim retentions, so large claims can exhaust coverage mid-term.
Last updated: June 2026
Directors & Officers (D&O) and Employment Practices Liability (EPLI)
Directors and Officers (D&O) liability protects a company's leadership against claims alleging wrongful acts in their managerial capacity - breach of fiduciary duty, misrepresentation, mismanagement, regulatory missteps - brought by shareholders, regulators, competitors, or creditors. It is the executive analog to professional liability: the harm is financial, the trigger is claims-made, and the policy responds where the CGL (bodily injury/property damage) does not.
D&O is structured in three insuring agreements, which the exam loves to enumerate:
The Three Sides of D&O
Side Who is protected What it pays
Side A Individual directors & officers Loss not indemnified by the company (e.g., company insolvent or legally barred from indemnifying)
Side B The corporation (entity) Reimburses the company when it indemnifies its directors/officers
Side C The corporation (entity itself) Entity's own liability - for public companies, usually limited to securities claims
Side A protects the personal assets of executives and is the most critical when a company cannot or will not indemnify. Side B is reimbursement to the corporation; note that a retention/deductible typically applies to Sides B and C but not to Side A - executives should not have to fund a retention out of pocket. This Side A/B/C retention distinction is a frequent test item.
Employment Practices Liability (EPLI)
EPLI covers claims by employees (and sometimes third parties) alleging wrongful employment acts: discrimination, harassment, wrongful termination, retaliation, failure to promote, and similar offenses. It is also written claims-made. EPLI fills a gap left by both the CGL (which excludes employment-related practices) and workers compensation (which covers bodily injury, not discrimination or wrongful-termination economic loss).
Covered: discrimination, sexual harassment, wrongful termination, retaliation, defamation tied to employment
Commonly excluded: intentional/criminal acts, bodily injury (workers comp's domain), wage-and-hour/FLSA violations (often a sublimit or excluded), and matters covered by workers compensation
Defense: usually within limits (eroding), like other management-liability lines
Many carriers bundle D&O, EPLI, and fiduciary (ERISA) liability into a management liability package with shared or separate limits.
Limits, Retention, and a Worked Example
Management-liability policies use a single aggregate limit with defense-within-limits and a per-claim retention. Consider an EPLI policy with a $1,000,000 aggregate, defense inside the limit, and a $50,000 retention per claim.
A wrongful-termination suit settles for $400,000 after $120,000 in defense costs.
The insured first satisfies the $50,000 retention.
Defense and indemnity both erode the limit: $120,000 + $400,000 = $520,000 of loss; the insured's $50,000 retention applies, so the carrier pays $470,000 and $520,000 (minus retention) is charged against the $1,000,000 aggregate, leaving $530,000 for the rest of the policy year.
Because the aggregate is annual and shared across all claims (and across D&O/EPLI/fiduciary if a shared limit), a few large claims can exhaust coverage mid-term - underscoring why limit adequacy and whether sublimits apply (e.g., wage-and-hour) are core underwriting and exam concerns.
Public vs. Private/Nonprofit D&O and the Severability Clause
The coverage profile shifts by organization type. Public-company D&O is dominated by securities-fraud and shareholder-derivative suits, so Side C is usually narrowed to securities claims. Private and nonprofit D&O face fewer securities suits but more claims from creditors, donors, regulators, and competitors, so Side C entity coverage is often broader and EPLI is frequently folded in.
Two provisions are tested heavily:
Severability of the application: the misrepresentation of one "bad" director does not void coverage for the innocent directors - each insured is treated separately, which is why Side A is so protective.
Insured-vs-insured exclusion: claims by one insured against another (e.g., the company suing its own former officer) are excluded to prevent collusive claims, though derivative suits brought by independent shareholders are carved back in.
Nonprofit directors often serve as volunteers, so Side A protection plus the severability clause is the practical reason qualified people are willing to sit on boards at all.