Delaware Legislation Clears the Way for Captive Director; Officer Liability Insurance (Feb. 17, 2022)

Delawarerecently amended its corporation law to allow corporations organized in Delaware to use captiveinsurance instead of purchasing directors and officers (D&O) liability insurance. Captive insurance arrangements are owned and managed by the corporation itself--eliminating the need to rely solely on an insurance policy from a third-party insurance company. It is the captive entity itself that retains the liability. Typically, captives are used to cover risks that are difficult to insure via commercial insurance. Now, Delaware has specifically amended its laws to permit corporations to use D&O captives--likely because of conditions in the market for D&O insurance generally. D&O insurance is typically used to cover costs associated with breaches of fiduciary liability and other types of liability exposure. Corporations organized in Delaware now may wish to explore the captive option to cover risks that are typically excluded from traditional D&O insurance policies.