The three common D&O insuring agreements: - Side A pays insured persons directly when the corporation does not or cannot indemnify them. - Side B reimburses the corporation for amounts it pays to indemnify its directors and officers. - Side C covers the entity's own liability. Side A and Side B both concern directors and officers, but Side A pays the person and Side B pays the company.

Example: TechCo, a public company, and its CFO are named in a securities class action, and TechCo indemnifies the CFO as its bylaws require. Side B reimburses TechCo for that indemnification, and Side C covers TechCo's own liability. Side A would apply only if TechCo did not or could not indemnify.

When indemnification is not allowed: California Corporations Code §317(c) limits indemnification in an action by or in the right of the corporation to expenses. If a court holds a director liable to the corporation in a derivative suit, there is no indemnification payment for Side B to reimburse, and Side A is the agreement built for that loss. Insurance is not barred: under §317(i), a corporation may buy insurance for an agent whether or not it would have the power to indemnify the agent against that liability.

Insured versus insured exclusion: it bars claims one insured brings against another, such as a company suing its own former CEO. It was designed to stop collusive suits aimed at the policy's proceeds. Policies commonly carve back certain claims, such as shareholder derivative suits.

Conduct exclusions with a final adjudication trigger: a D&O policy may exclude deliberate fraud only after a final adjudication. An allegation alone does not end coverage, so a director accused of fraud keeps a defense until a final judgment establishes the deliberate conduct.