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Yates Memo, D&O Coverage, and the Coverage Gap

Tom Fox | November 9, 2015

One consequence of the Yates Memo that has not received as much attention is whether current directors-and-officers liability insurance provides appropriate insurance coverage for the legal expenses incurred by executives who might go through an internal investigation. The Yates Memo makes clear that companies must now first investigate and turn over to the Justice Department information on individuals in any investigation (Foreign Corrupt Practices Act or otherwise), or risk not receiving any cooperation credit.

The typical D&O policy may not fully cover officers and directors caught in an internal investigation. The issue for many D&O policies is around the “trigger” for coverage. Such insurance usually kicks in only when an outside body (such as the Justice Department or Securities & Exchange Commission) would issue a subpoena or request an interview of a board member or senior executive.

An internal investigation, however, does not usually begin at...

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