SPAC D&O insurance helps manage the risks inherent to taking your company public.
SPAC Expertise You Can Count On
Special-purpose acquisition companies (SPACs) have emerged as a popular alternative to the traditional IPO process in recent years. However, the rise of SPACs has also resulted in an increase in SPAC-related litigation. This is a relatively new and specialized area of risk, so not all insurers are able to provide appropriate guidance. NSI has the experience and expertise you can count on.
Protect Your Company and Your Executives
When a company goes public via a SPAC transaction, there’s a lot of excitement. However, that same excitement can lead to lawsuits if expectations are not met promptly. Lawsuits often name individual executives as well as the company itself, and the leaders of your company may be held personally liable for their actions. SPAC D&O insurance provides critical protection for both your company and your executives.
SPAC transactions can lead to many allegations, including:
- Misrepresentation
- Breach of fiduciary duty
- Insufficient due diligence
- Mismanagement
- Failure to comply with regulations
We offer tailored management liability insurance solutions, including D&O coverage, tail coverage for executives, employment practices liability insurance, E&O, cyber, crime and more, to help you safeguard against potential exposures.
Key Coverage Features
D&O insurance consists of three “sides” that work together to protect both the company and its directors and officers.
- Side A provides coverage directly to the directors and officers named in a lawsuit when the company cannot indemnify them.
- Side B provides reimbursement coverage to the company when it indemnifies the directors and officers named in a lawsuit.
- Side C provides coverage for the company itself when it is named in a lawsuit.
Frequently Asked Questions
When should my company purchase SPAC D&O insurance?
The sooner, the better. SPAC D&O claims often stem from statements or actions that occurred during the lead up to the SPAC transaction, so it’s important to secure insurance that covers the entire process, from the initial search to the de-SPAC transaction.
D&O insurance policies typically have a retroactive date, which is often the first date of continuous coverage. Claims involving events that took place before the retroactive date will not be covered, even if the lawsuit is filed while the policy is in force.
Why does my company need Side A coverage?
Side A provides coverage for the leaders of your company when the company is not able to provide indemnification. This can happen in several different situations, including lawsuits that occur after a company has declared bankruptcy and shareholder derivative lawsuits in which a shareholder files a lawsuit against the directors and officers on the behalf of the company. Having robust Side A coverage provides valuable protection for directors and officers in situations like these.
Does all D&O insurance provide the same protection?
No. D&O insurance policies can vary significantly in terms of limits, exclusions and other coverage terms. For example, some D&O policies exclude SPAC or IPO-related claims. Many company leaders don’t realize that their coverage is insufficient until they are facing a claim and discover that they have insufficient coverage – or worse yet, no coverage at all. NSI will advocate on your behalf to help you secure robust coverage terms that provide adequate protection for your company.
What is tail coverage and does my company need it?
Tail coverage is an endorsement that provides an extended reporting period. D&O insurance works on a claims-made basis, which means that claims are only covered if they occur while the policy is active. If a lawsuit is filed after coverage is terminated, it won’t be covered, even if the event in question occurred while the policy is in force. This can become a problem when coverage ends and then a lawsuit is filed months or years later. A common scenario involves a company that declares bankruptcy and closes, and then the executives are named in a lawsuit. Tail coverage provides an extended reporting period, so coverage continues for a certain period of time after the policy ends. Learn more about tail coverage.
