The U.S. Department of Justice's rollout of its new corporate whistleblower program should spur policyholders to examine their directors and officers insurance policies for potential gaps and consider alternative options to supplement coverage for the company, experts said....

"For as long as I can remember in the D&O market, there's always been a lot of friction over some regulatory or law enforcement process and whether it gets covered and at what state it gets covered," policyholder attorney Joshua Gold of Anderson Kill PC told Law360. "So I think a lot of D&O policies are deliberately designed to delay the point upon which they say, at least, a policyholder can start receiving its D&O coverage."

Whether companies' D&O policies could be triggered comes down to the policy language and their coverage towers, Gold said, with entity coverage playing a large role.

D&O policies offer separate coverage for investigations of the entity itself, typically focusing on securities claims for public company policyholders and taking a broader angle for private companies, but the extra coverage specific to investigations against the company comes at a cost....

Gold also took a favorable stance on entity coverage, telling Law360 it could be worth the extra premium money so that policyholders have confidence that their coverage is clearly established.

"I think, unfortunately, some D&O insurance companies are happy to have the language on enforcement actions, civil administrative proceedings and regulatory proceedings be vague and then see where the claim goes from there and fight about it if needed," Gold said....

Gold also shared that clear rules on investigating complaints of wrongdoing are of high importance and that policyholders may need to retain specialized counsel who's well-equipped in understanding money laundering rules, financial crimes or other misconduct the DOJ may look for.

"It's not preordained as to what the outcome is going to be, you have to let the facts take you where the ultimate conclusion should be," Gold said. "It shouldn't be outcome-driven, and I think that goes a long way to protecting the organization in the long run, even if it's painful in the short run."

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