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Will your D&O coverage be there when you need it?

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This story appears in the October 2006 issue of Entrepreneur. Subscribe »

Lawsuits, scandals and corporate collapses have made even small companies aware of the need for directors and officers (D&O) liability insurance, which protects company leaders from personal liability and financial loss arising from actions they take in their professional capacity. Can you be sure your D&O coverage will be there if you need it? Steve Shappell, managing director of Chicago-based Aon Financial Services Group's legal and claims practice, says you can-if you understand two important concepts: rescission and severability.

D&O coverage can be rescinded if the insurer finds that you made a material misrepresentation when you applied for the policy. But what if one of your officers failed to disclose information and the others didn't know about it? That is where severability comes in.

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