68. Transforming D&O Insurance: Innovations in Directors & Officers Coverage

In this episode Michael Talmanson and Dereick Wood discuss the critical importance of D&O coverage for board members. They set the context with a backdrop of Newfront’s recent capital infusion led by Goldman Sachs emphasizing the company’s innovative approach to combining technology with insurance expertise.

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Newfront Technology Edge

Big Ideas/Thoughts/Quotes

  1. Background & industry evolution
  • Michael shares his transition from legal practice to insurance, driven by a passion for technology and client service. He discusses how Newfront’s technology platform and AI tools modernize the insurance experience, enhancing client’s ability to manage and predict risks.
  • Dereick discusses his extensive experience in handling complex D&O claims, underlining the evolution of claims and the increasing magnitude of derivative settlements.

“The differentiator is the information you can provide boards to make informed decisions about their actual losses.”

  1. Newfront’s Innovation & Impact on the Insurance Market
    • Newfront’s strategy of blending high-tech solutions with traditional brokerage services to address the needs of a rapidly changing market. Michael highlights the critical role of experts like Dereick in navigating complex claims, underscoring the blend of technology and human expertise.
    • Discussion on Newfront’s “breakthrough” technology which simplifies processes like contract reviews and risk assessments through AI, setting a new standard in the insurance industry.


 “Since 2020, seven of the top ten largest derivative settlements have occurred, and the people on my team have been involved in all those settlements”

  1. D&O Insights
  • Comprehensive breakdown of D&O insurance coverage (Side A, B, and C) and its importance from a buyer’s perspective. Michael and Dereick discuss practical scenarios and the vital protection D&O insurance provides to board members against potential liabilities and lawsuits
  • Dereick provides insights into recent high-profile cases and settlements, demonstrating the critical nature of D&O coverage in protecting board members during legal challenges


  • Strategic recommendations for board members to ensure adequate D&O coverage, emphasizing the importance of understanding policy details and the implications of board decisions on insurance claims
  • Michael and Dereick providing practical advice to board members on avoiding litigation and ensuring robust D&O coverage. They stress the importance of diverse opinions and backgrounds on boards to enhance decision-making and risk management

“No matter what happens from a technology perspective, insurance will always require experts. People like Dereick on the claims side, D&O experts, cyber experts.  People will never be replaced by technology.”


Joe: Hello, and welcome to On Boards, a deep dive at what drives business success. I’m Joe Ayoub, and I’m here with my co-host, Raza Shaikh. Twice a month, On Boards is the place to learn about one of the most critically-important aspects of any company or organization; its board of directors or advisors, with a focus on the important issues that are facing boards, company leadership, and stakeholders.

Raza: Joe and I speak with a wide range of guests and talk about what makes a board successful or unsuccessful, what it means to be an effective board member, and how to make your board one of the most valuable assets of your organization.

Joe: Our guests today are Michael Talmanson and Dereick Wood, who are each vice presidents at Newfront Insurance. The topic of our podcast today is insurance, Directors & Officers Insurance, [00:01:00] which is something vitally important to everyone that serves on a board. By way of background, before we introduce Michael and Dereick, I’m going to read something from a Goldman Sachs memo that I think will give you a good perspective on why we thought discussing what Newfront is doing is particularly interesting.

In April of 2022, the growth equity business within Goldman Sachs asset management led Newfront’s recent capital round, and here is part is what they said as to why they decided to lead that round, “Through our research, we’ve developed an investment thesis around modern full-stack disruptors and how they are transforming large portions of the financial services sector. We invested in Newfront because of their unique marriage of technology and insurance and benefits domain expertise. We believe [00:02:00] Newfront fits our thesis perfectly and represents the future of commercial insurance.”

Michael is an executive vice president and founding partner of the Boston office of Newfront. Prior to that, he was a senior vice president in Arthur J Gallagher & Company, and prior to that, he was a practicing attorney beginning his work in 1999 at Testa, Hurwitz in Boston, where he practiced with a number of people I know and still maintain friendships.

Raza: Dereick is the Senior Vice President at Newfront. He, before that, was the Vice President at Berkshire Hathaway Specialty Insurance and a Senior Complex Claim Director at AIG prior to that. He was a practicing lawyer before making a career in the insurance world.

Joe: Welcome, Michael and Dereick, and thank you so much for joining us today on On Boards.

Michael: Thanks for having us.

Dereick: [00:03:00] Thank you.

Joe: Michael, I’m going to start with you for an overview of Newfront. First, if you would start with basic background, then we’ll just talk about the breakthrough technology.

Michael: Sure, thanks. Joe, as you mentioned, I began my career as a lawyer representing technology and life science companies, really my passion and I continue to work with companies in those spaces. I became an insurance broker. Like many people, I transitioned out of the practice of law into something different and I’m sure we’ll talk about this in our podcast.

One of my mentors at Tesla is a former guest of yours, John Hession, who has now joined us recently, and John in particular had an entrepreneurial spirit that I loved and I have really followed that in my career to try to do entrepreneurial things where I develop, maintain, and build upon client relationships.

Throughout my career, I transitioned from a lawyer to becoming an insurance broker. First at the region’s largest independent broker where we focus on [00:04:00] technology and life science business. We’re acquired by a big global broker and I had a great, successful, happy career and I thought I would stay there forever.

But you indicated some factors in the Goldman thesis that we call it that really drew my attention. First, no matter what happens from a technology perspective, before we focus on sort of the future of insurance, just a bit on the past, insurance will always require experts and they are the heart of what we do. People like Dereick on the claim’s side, D&O experts, cyber experts, people will never be replaced by technology.

But the industry is unbelievably, as I always say, sleepy, and I felt that my clients deserve something far more sophisticated and future looking and Newfront has created a technology platform, both a platform to help clients manage risk [00:05:00] and using AI tools to help clients predict risk and have much more informed, structured data that I thought would modernize my clients’ experience and really provide a unique solution, and so once Goldman invested, I made the move with nine colleagues to start the Boston office. We’re off to a great start.

Joe: So, talk a little about the basics of Newfront. Who you’re able to provide D&O for? Are there any limitations and writing insurance for anyone? And how big are you, et cetera, that kind of basic stuff so people get a general picture.

Michael: Yes, let me just share very briefly about the history of Newfront. We started as a firm, much like my original firm that I mentioned, Arthur J. Gallagher & Associates, it was a firm called ABD West Coast based, a real tech and life science-focused powerhouse, privately-held broker. Really, one of the leaders in the [00:06:00] country for technology and life science business, but they were based in California and that’s where they operate. They didn’t have offices certainly on this side of the country, and they approached me many years ago to start the Boston office.

Like I said, I was pretty happy with where I was, and then a company was acquired by Newfront, so it’s very, very interesting because Newfront was a technology company, a venture-backed technology company that had a brokerage business, but they were really focusing on creating technology solutions for the use of their clients, but the brokerage operation was very small.

Unlike most technology startup companies, they did something revolutionary. They actually acquired an unbelievably profitable broker, an unbelievable profitable business to help fuel both the growth of technology and the expansion of the business across the country, and then Goldman led [00:07:00] the round of financing that you referenced in 2022. Total game changer for me, and that’s when we decided to make the move.

Joe: When we talked a few weeks ago, you said that Newfront is a modern insurance broker with “breakthrough” technology that provides information that others cannot provide. What is the breakthrough technology and what does it provide?

Michael: Breakthrough, I put in quotes because our industry is so sleepy, some of the technology I would describe to you might seem very basic, but we have a platform that clients can use to manage risk. They both manage their policies, their day-to-day insurance needs, pay bills, much like an online banking experience that we create for our clients that just doesn’t exist in the brokerage world.

You’d be surprised if a client needs a certificate of insurance or wants to pay a bill or make changes to a policy, how outdated that [00:08:00] process is, so we have a technological platform and then we also use AI to provide data for our clients on contract review and what we’re going to talk a lot about today, D&O loss model.

Joe: I think you said that the differentiator is the information you can provide boards to make informed decisions about their actual losses. How does that work, big picture?

Michael: Sure. So, we have a D&O loss modeling tool, and if you look at how predictive loss was analyzed by boards traditionally in our segment is, you would look at class action settlement data for industries based in certain market cap bands, but it’s all back looking. It’s all based on past trends. Using AI machine learning and an incredibly large amount, both of data inputs and a variety of factors, like a company’s stock performance [00:09:00] is one example, the makeup of a company’s board, performance, stock volatility, historical trade volume, these are all factors that are not inputted in loss modeling.

Our machine learning tool is able to input that data and help provide an assessment of volatility of loss and also the likelihood of a claim in the first place. So, if you look at how brokers typically advise clients on risk, it’s all factored on whether a claim is brought in the first place. But before you can even determine what the value of a lawsuit be in a claim, you want to know what your likelihood of getting sued is. Our model allows that information to be presented.

Joe: That’s very helpful. When we talked a few weeks ago, you mentioned that Newfront provides a different level of service and expertise and that there is no claim you haven’t seen in [00:10:00] D&O, especially when it comes to a board of directors. Tell us a little bit why you can make that claim and other brokers are not able to make it.

Dereick: I’ll take this one. Well, Joe, we’ve been doing this for a long time. As Raza mentioned earlier, based on my experience both as an attorney and working in-house for the AIGs and the Berkshires of the world, we’ve seen the D&O product and also the claims that arise that the policy responds to, we’ve seen them evolve over the last few years.

That being said, since 2020, seven of the top ten largest derivative settlements have occurred, and the people on my team have been involved in all those settlements, so either on the carrier side or as a broker. So, while other brokers have seen those claims as well, we’ve been involved in them. I was involved with settling some of these claims as well, so we have that anecdotal perspective as well as the AI as Michael was [00:11:00] talking about to kind of predict what’s going to happen in the future.

So, we’re very well versed in what’s happened in the D&O landscape in terms of settlement trends, but also where things are going. We definitely have our finger on the pulse of what the claims we are looking at in terms of when they bring claims derivatively against the corporation and the board of directors is held accountable, and we’re also looking at all different types of litigation trends or even regulatory trends that might affect directors and officers, anyone on the board.

It’s one of those things where our team with over 50 to 75 years of experience come cumulatively in terms of Directors & Officers claims, and claims that affect the board of directors, we’re very well versed, and we’re definitely on the pulse of what’s going to happen next in terms of what’s happening right now.

Joe: Thank you.

Raza: Michael, if I start with you and Dereick, please, add as well. I just want to know what is D&O insurance from a buyer’s perspective, what are the common features, [00:12:00] parameters or configurations the board ought to be looking at, and what do we seek the D&O insurance for.

Michael: The policy provides protection for all past, present, and future officers and directors. So, if a new board member joins during a policy period, you don’t have to make any changes to the policy, they’re automatically covered. Same thing with an officer of the company. A D&O policy has three sections to it, side A, side B, and side C.

So, side A covers the individual directors for non-indemnifiable claims where the company cannot indemnify its officers and directors. Side B reimburses the company when the company is able to indemnify its officers and directors, and side C is coverage for the entity if the entity is named in a claim that’s covered by a D&O policy.

For the bulk of your listeners, what they’re going to care most about is the side A coverage, because in the worst-case scenario, where the company is [00:13:00] unable to indemnify its officers and directors, either because it’s prevented by law from doing it, or it doesn’t have the financial resources to do so, the insurer will step in, and Dereick, I think, can add a lot more color on the importance of side A coverage.

Dereick: Sure, no problem. And Michael, you’re 100% correct. There are three different modules of coverage, the A, the B, and the C. The side C coverage, as Michael said, is usually just for the entity in terms of a securities claim, and they offer balance sheet protection for the corporation should they be brought into a suit.

That side B, as also as Michael elaborated on, that refunds the entity for any amounts of loss that they paid to identify a director and officer, but as Michael said, the most important prime module is that side A module. We call it side A, or maybe a sleep covered and it’s called sleep insurance because it allows directors and officers to sleep at night.

As Michael said, that’s for non-indemnifiable loss. So, in the case of insolvency, we usually see a [00:14:00] lot of claims brought after a bankruptcy and usually brought against the board of directors, therefore, that is where that side A coverage comes in to kind of backstop any kind of personal asset protection and really stand in front of it.

Also, we see side A cover used a lot, and as I mentioned earlier, in this onset of derivative complaints and derivative settlements because those derivatives settlements are brought by shareholders on behalf of the corporation, the corporation can’t pay that loss. It’s not indemnifiable so that’s when the directors and officers will look at that side A insurance that they’ve purchased from a carrier to fill in and pay that settlement so that doesn’t come out of their pockets and just given the exposure and severity we’ve seen in these settlements, it’s really one of the most important products you can have right now, because as we all know, once we see one settlement, there’s always going to be another one that’s even higher because that’s just kind of how litigation works and how the dynamics of settlements have played out over the last few years.

Raza: So, two quick follow ups. Michael, you [00:15:00] mentioned past, present and future. Does that mean even if I’m no longer a director on a board, that if a future litigation happens, that I am still covered and then how does this whole thing work in terms of when the claims start happening, do I have cash advances or do I get reimbursed? I know these are super minor details, but curious how these two things work.

Joe: Raza, they’re not minor details to the board member that’s being sued.

Michael: I mean, that is why we’re slightly interesting to people is because these D&O claims can be big, nasty and it is an interesting area of coverage. A short answer to your first question, if you are a former director and you get sued within the time period that a claim is made policy, so the policy that responds is a policy that’s in place when a claim is brought, even if the matter happened or the action giving rise to claim [00:16:00] happened in the past. So the short answer is yes, a prior director is covered.

Dereick: Most of the policies are. subject to a retention except if it’s a Side A loss where it’s unidentifiable. At that point, yes, the policy, Raza, will step in and advance payments for defense costs or any settlements with a zero dollar retention or deductible.

Michael: That’s a great point. One thing that we should emphasize as to why you refer to side A coverage as sleep coverage. The directors don’t have to come out of pocket, so it’s why it’s vitally important that a company have D&O in place before an individual director chooses to take a board seat because they want to make sure they’re covered in the event of a claim, but they also want to make sure they don’t have to come out of pocket for the retention or a deductible.

Raza: So, if I am being asked to join a board, it’s good for me to check that their D&O insurance is not only current, has adequate coverage, and somebody has been paying the premiums.

Michael: That’s correct.

Dereick: Correct.[00:17:00]

Joe: So, let’s talk about the coverage, and particularly some of the claims that are made, which some of the listeners will be familiar with. The first one to talk about is breach of fiduciary duty, and I think when we talked previously, we talked about the Boeing case, because I think that was one of the claims that was made against board members in that case, and the other one are so called Caremark claims, which I believe are breach of the duty of loyalty. Could you talk about those two claims and what they mean day-to-day when you’re sitting on the board?

Dereick: Michael, I’ll take this one, but feel free to add in if you want. Listen, the Caremark claim where the breach of a duty of loyalty and care to the corporation is a breach fiduciary case where they’re saying that the board members have failed their duty of oversight like Boeing or Wells Fargo to oversee the corporation and make sure the corporation has internal controls and that the corporation is in compliance with those controls.

This is very important because shareholders, when they file a claim saying that the [00:18:00] board has failed in its oversight, they’re saying that the corporation has been harmed, both reputationally and by other damages, such as in fines or penalties, and therefore has suffered monetary damages, and they’re looking at the board to either call back money from the board or pay for those damages.

That’s where that side A coverage comes in, and these settlements are large. The Boeing settlement was 237. 5 million dollars. That was a claim against the board for failing to oversight for the 737 MAX. Wells Fargo was 240 million. That was failure to oversight with unauthorized account scandal and we just saw the Tesla 735 million, and that was more concerning boards breaching their fiduciary duty in terms of compensation plans so what we’ve seen over these past few years are tremendous amounts of settlements aimed at the boards for failing in their oversight capacity to kind of be independent and oversee the board.

One of the things that my former CEO, Warren Buffett’s saying [00:19:00] is, what did you know, when did you know it and what did you do about it? And that is what boards are being held accountable for is, what did you know. Just like in the Boeing case, when did you find out that there were issues with this plane, and then what did you do about it in terms of controls or compliance or checking any red flags to make sure that it didn’t happen again?

Joe: That’s really well explained. I think that’s great. What about private companies though? The suits you talked about, the claims you talked about are public companies. Private companies get sued, board members get sued for breach of fiduciary duty and breach of the duty of loyalty as well. Talk about those claims.

Michael: Yeah, I’ll jump in just again from a high-level perspective. It’s so interesting because even though the coverage is generally the same for a private and public company, although the policy forms are different, the exposure is wildly different and the premiums are wildly, wildly, wildly different from [00:20:00] one another.

What I would generally say to my clients is that if you’re a well-financed private company, the risk of a D&O claim is very low, but for all the reasons we talked about; outside investor, an investor or an independent director, they’re not going to serve on the board unless there’s D&O coverage in place regardless of the risk, so you need the D&O portion of the policy, but what would actually respond most for a private company is an employment practice liability policy that covers claims relating to sexual harassment, wrongful termination, discrimination, and then going back to the D&O piece for companies that are not well financed or not performing well, that’s when the risk of a claim is the highest and honestly where you need a really sophisticated broker to get coverage in the first place because insurers like to see that a company has a fairly lengthy [00:21:00] runway of cash.

Joe: Let’s say that a company has lots of cash and then runs into trouble, the coverage obviously stays with the company, even though it’s run into trouble. Correct?

Michael: Absolutely. If it were used on an annual basis, so if a company is well financed and not in trouble in year one and in year two, there’s something indicating that the performance of the company is going the other direction, that should be reflected in the premiums, but coverage should be available. Knock on wood, I have not seen a company not be able to get D&O coverage.

Joe: I think what you said was if a company’s performance is not going well, coverage “should be available”. What are the situations in which for a private company it becomes unavailable.

Michael: I have not seen coverage becoming unavailable. It’s sometimes very difficult and that’s why my hair discolors. You have to argue and fight with carriers to get [00:22:00] coverage, but sometimes they may extend the policy and I can explain why that can put a company in a difficult position.

If a claim has already arisen during a policy year, it can compromise the limit, and if a carrier then wants to wait to offer coverage to see if they’re going to get financed, let’s say, and they extend the policy, that limit that was supposed to be available for 12 months gets extended for whatever the extension period is, and then there’s no guarantee that the company is going to be offered coverage in the future.

But what we see all the time is companies telling carriers because it’s a truth that they’re in the middle of negotiating a round of financing or they have a term sheet, so a signed term sheet is better than negotiating a financing and having a deal closed, waiting for the money to hit the bank is better than a signed term sheet, but depending on where you are in the financing cycle, if you’re struggling, it can be difficult to get [00:23:00] coverage. Not necessarily impossible.

Joe: Are there cases in which you have been involved where you denied coverage to a company that was running into trouble financially?

Michael: In my career, I have not had a client who’s been unable to get insurance. Dereick, I don’t know if you have.

Dereick: Yeah, I would agree with Michael with that, and just to be clear, as the broker, we’re going out pursuing coverage for the clients, but the insurance carriers are the ones who are ultimately going to bind the insurance or not, and like Michael said, the underwriters for the carriers are very in tuned with all the companies and all the different business areas, so they’re going to be looking under the hood for all these companies.

But I do agree with Michael, if the company is solvent and can put forward a business plan and financials, it’s very extremely rare that they wouldn’t be offered some type of coverage. So, that’s our job to try to maximize the coverage that they would be able to get and to make sure that if they do have an event where there’s a [00:24:00] claim and they need to access the coverage, that everything works as it should be, and that the coverage would kick in.

Michael: The carriers may step in in a really bad situation and say we’re going to exclude certain claims or we want to hire retention, or we’re going to jack up your premiums significantly, not to turn this into an advertisement for Newfront, but you do need a broker who is well versed in situations, both representing unbelievably successful companies, but also companies that are struggling. You need to have really strong relationships with the carriers to make sure that the coverage has so many holes in it that in a troubled situation, there wouldn’t be any real coverage, even if a policy exists.

Joe: So, one of the things we talked about is where the highest premiums are sometimes found, and the two areas you talked about were science and technology and cyber risk insurance. Can you tell us a little about that, and either one of you can jump in for this.

Michael: Sure. Yeah, it’s one area we [00:25:00] focus a lot on and unbelievably complicated is product liability claims for life science companies that are involved in clinical trials, and this was one of the compelling reasons that my team and I joined Newfront is that we have a technology platform, the only one in the industry that I’m aware of where our clients can go and obtain clinical trial coverage through our portal.

They can access the portal to look at country requirements to see what’s required, upload informed consents and protocols, and next thing you know, it automatically spits out a bindable quote. Even though it might be easy to get coverage, the more involved the company is in the clinic, the higher price the policy is and the more robust your life science program needs to be.

Similarly, with cyber coverage, really hot button area in the world of insurance now. It’s amazing how disinterested boards are [00:26:00] in certain areas of insurance and how interested they are in D&O insurance and cyber. The amount of questions we get on cyber over the last three, four, five years, as you can imagine, has just exploded, and it’s really important that you have a broker who can respond to pretty interested directors in this area.

Joe: Let me ask this question. If there’s a cyber breach and personal information is suddenly available to the public, is that a cyber insurance coverage or could it also be a D&O coverage for the failure of the board to properly monitor and oversee the protections that their company are providing for this important data?

Michael: So, for that question, the answer is yes, it can be both. So, a cyber policy provides first-party and third-party coverage. So, if there’s a dissemination of [00:27:00] personally identifiable information, personal health information, confidential information, there’s coverage for the company for costs and expenses it incurs to provide notice, to hire a forensics firm, to hire a legal expert. There’s third-party coverage if they’re sued relating to the data breach, and as Dereick can talk about, a D&O policy may respond if there is a securities claim alleging a drop in stock price because of the cyber matter.

Dereick: Yeah, 100% correct, Michael. What we’re seeing, Joe and Raza, is we’re seeing this play out in real life all the time now where just we’re seeing larger breaches, we’re seeing business interruption, we’re seeing privacy actions brought on top of that because of the leak of personal information, and then what we’re seeing is a D&O claim coming out of that, whether you look at Equifax, whether it’s a stock drop related to the breach, and then you bring a suit, or maybe something that Michael alluded to earlier where there’s a [00:28:00] policy in place that wasn’t properly overseen and we should have been aware that we had these issues with our cyber and that’s what led to this loss. And we’ve also seen now where a lot of boards are required to have a cyber expert or our CISO on their board, just for this very reason, because we’ve seen cyber losses leak into D&O extremely frequently lately.

Raza: Speaking of the risk profile of different companies, I know public companies have a very different risk profile for D&O insurance versus private companies. Dereick, I wanted to ask you about the specific situations where an activist shareholder gets involved and comes into the picture. What does that do to the D&O insurance?

Dereick: Well, the D&O insurance, anytime an activist shareholder starts sending letters to the board or a company, we automatically notice the D&O carrier because automatically there is now a cloud of potential litigation around the company. So whether or not it’s a [00:29:00] claim under the policy of that first letter or something that could be a circumstance that could lead to a claim. It’s something that we want our carriers to be informed of because as we’ve mentioned earlier, these are all potential losses that could affect the board of directors.

Basically, the activist shareholder is saying that you, the board, the CEO who run this company, you’re doing something wrong, and this is what you should be doing. So, those are potential wrongful acts that could trigger coverage under a policy, depending on how the letters are stated, and usually it’s one letter, which leads to another.

Definitely, those are things that we deal with every day and things that we involve our carriers with because to the extent that that demand now becomes an actual claim and something where the company feels they have to retain defense counsel to respond to some of these activist letters, that’s something that typically is covered once the insurance brief is triggered.

Raza: Yeah. Sounds like a great idea to have that coverage. Michael, maybe switch to the [00:30:00]cost and premiums for this insurance. I’m sure there’s a range. I’m sure it varies. Give us just the kind of like just a ballpark or let’s say US-based insurance.

Michael: So, a couple of data points for a private company for an early stage investor-backed company tends to be when they would buy insurance for the first time, they might purchase a million dollars of coverage that could be $3,000 out of the gate. If they wanted more limit, it could be $15,000. So, you’re looking at a fairly tight range for an early stage company. As a company gets closer to an IPO or an exit we recommend that they would have a minimum of $5 million of coverage and the premium might jump up to 50-ish thousand dollars. If you’re a unicorn with eyes to go public and big revenue, it could be a couple hundred thousand dollars for 5 to 20 million dollars of coverage. Twenty million I think would be high for any private [00:31:00] company.

Conversely, when a company goes public, I always say the day before an IPO, you might spend $40,000 of insurance and then you start trading and your insurance jumps up in the millions. I mean, it’s really a significant item that as a company is preparing for an IPO at least 12 months in advance, they need to start thinking about budgeting for an IPO, the process to get D&O coverage. You have an underwriter meeting when you file a confidential s1. You want to have nondisclosure agreements in place with the carriers because there are no applications when a company goes public.

There’s a story that’s told in an underwriter meeting and all underwriting is based off of the S1 and publicly available information. So, it’s a real game changer from a coverage standpoint and the premiums might start around a million dollars with retentions or deductibles in the millions. We would see a [00:32:00] retention of two and a half million dollars for a company that’s going public.

Well, one thing that’s also very interesting when you look at where claims are brought against public companies, the risk of a D&O claim is actually higher within the first three years of an IPO, so the cost of your D&O insurance in any market, right now we’re in a soft D&O market, so premium should be dropping in some cases, very, very significantly, although there are signs that the market is turning. But if you’re three years or more away from an IPO, your premiums actually might be lower than they were within that window closer to an IPO.

Raza: And this underwriter meeting you mentioned, sounds like this is where a broker like Newfront can really make the difference and prepare the client with the proper context to have an effective meeting.

Michael: Absolutely, and one of the things that I like to say is when a [00:33:00] company is getting ready to go public or negotiating a public policy, they’ve been public for a long time, the person negotiating coverage on their behalf is not me. I manage the relationship with clients, but we have experts with deep, deep experience. The person who my colleague, James Ciarleglio, who runs our Northeast D&O practice ran AIG’s D&O practice, so he has years and years under his belt as an underwriter so he can sit with management teams as they prepare for this underwriter meeting. to alert them to what the carriers will be most interested in an underwriting meeting, give guidance on how to present financial information. If a company is involved in clinical trials, this is one thing we do all the time to share a story about the drug and where they are in the clinic and results. So, telling the company story Is so vitally [00:34:00] important and having some who sat on the other side of the table from that perspective is really hugely valuable when you’re preparing for that very important meeting. When you’re spending millions, we always say to our clients do not underestimate the importance of that meeting.

Raza: Michael and Dereick, the final question I wanted to ask you was your top one or two tips to boards for practices that lead them to avoid trouble with D&O.

Michael: My advice would be to listen to your lawyers and when there are questions about what to disclose or not to disclose, it’s really important to listen to your legal team. One of the things that has made me I think successful in this career is how much I respect companies’ legal teams, and they’re just absolutely invaluable.

Raza: And Dereick?

Dereick: Yeah, I think that’s a great point. And along those lines, obviously, number [00:35:00] one, know your insurance and your broker, and ask them any questions. But along the lines of what Michael said, especially when you’re dealing with a board dealing with transactions, anything like that, make sure that you’re getting fair opinions and that you are doing everything by the book.

I mean, take your time. One of the most frequent things we see is that there was a rush to get something done and we skipped over steps two, three and four, just to close the deal or to make it happen and then we see the litigation come shortly thereafter, so that would be my tips. But I think they all fall in line with just trust your lawyers and make sure that you’re doing everything by the book.

Joe: How about doing your job? So, putting the lawyers aside, if you looked at something like the Boeing case, Silicon Valley Bank, the question really became is where was the board? That’s not a lawyer issue. That’s a board issue. The board may not have, and I don’t know the details, but the [00:36:00] allegations have been in these cases, that the board really did not act when it needed to.

So back to the question, what should boards do or what can they do before the lawyers are involved to do their job in a way that might help them avoid the kind of D&O coverage claims that we’ve been talking about.

Raza: I think it is what Bill Belichick said.

Michael: Do your job. One thing that I would recommend and we’ve talked with you guys about this is as we’re leading up to this, I think diversity of opinion and backgrounds on boards is critical.

Raza: A well composed board goes a long way in decision making and helping you do your job.

Michael: Absolutely.

Joe: Dereick, you agree with that?

Dereick: I agree with it a 100%, and that’s something that we’ve seen obviously a big top of an issue lately, but In terms of practice now plays out, I think the diversity of [00:37:00] thought is something that a well constructed board is usually one that has a lot of different diversity in terms of thoughts and the members on that board.

Joe: Michael and Dereick, it’s been great speaking with you today. Thanks so much for joining us.

Michael: was a lot of fun guys. Thank you very much.

Dereick: Joe. Thanks.

Joe: And thank you all for listening to On Boards with our guests, Michael Talmanson and Dereick Wood.

Raza: Please visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.com. We’d love to hear your comments, suggestions, and feedback. And if you’re not already a subscriber, please be sure to subscribe at Apple Podcasts, Spotify, or wherever you get your podcasts and remember to leave us a five-star review.

Joe: Please stay safe and take care of yourselves, your families, and your communities as best you can. We hope you’ll tune in for the next episode of On Boards. Thanks.