This article originally appeared in Anderson Kill's Policyholder Alert (September 21, 2011).

You buy a “seamless” multilayer tower of directors and officers (D&O) liability insurance to protect your company and your directors and officers. Your top-flight insurance broker gives the OK. Each insurance company up that tower is eager to take your hard-earned premium check. You believe that you have purchased a seamless – and very expensive – tower of D&O liability insurance. Sleep well poor policyholder.