16.1 Order of Payments

An ABC D&O policy will typically bear an “Order/Priority of Payments” clause, which will follow the order of coverage from Side A to Side B and then to Side C.1 Where each Side has its own tower of coverage, as D&O policies are “Claims made”, the order of payments will be based on the chronological order in which Claims against parties falling within that tower were made.2 Where Claims are deemed to have been made against multiple co-insureds under one Side at the same time, the allocation clause will respond. If the policy limit is likely to be exhausted by the indemnification, and the co-insureds are entitled to indemnification at the same point, it is likely that an equitable approach will be taken; the IA 2015, which requires the insurer to pay any sums due within a reasonable time,3 will likely be considered the most reasonable approach. As elaborated in the case of Teal Assurance Co Ltd v WR Berkley Insurance (Europe) Ltd,4 an insured cannot decide the order in which claims will be paid by the insurer.5