Executive Indemnification: What It Covers — and What It Doesn’t
Indemnification agreements are supposed to protect executives from personal liability — but not all protections are created equal. In fact, many executives are blindsided to learn that their indemnity rights can be revoked, delayed, or denied altogether. At LibertyBell Law Group, we help executives understand and secure real legal protection before it’s tested in court.
What Is Executive Indemnification?
Indemnification is a contractual or bylaw-based promise that a company will pay for legal defense costs, settlements, or judgments if an executive is sued for actions taken in their official capacity. It is a critical safeguard — but it’s not automatic, and it has limits.
What Indemnification Typically Covers
- Legal defense costs in civil lawsuits
- Settlements from shareholder disputes or employment claims
- Regulatory inquiries and investigations (e.g., SEC, DOJ)
- Claims of negligence or breach of fiduciary duty — if made in good faith
- Some criminal defense costs (pre-conviction)
What Indemnification Usually Doesn’t Cover
- Fines, penalties, or restitution for willful misconduct
- Defense costs after a finding of fraud or illegality
- Claims arising from actions outside official job duties
- Disputes between the executive and the company itself
- Deliberate violations of law or policy
Why Indemnity Rights Fail When You Need Them Most
- Boards delay or deny advancement of legal fees
- Coverage depends on board vote or investigation outcome
- Bylaws can be changed mid-dispute
- D&O insurance doesn’t always match indemnification terms
Real Case Example: Indemnity Revoked During SEC Probe
An executive under SEC investigation was initially granted indemnity. But when the board changed and public pressure mounted, indemnity was rescinded. LibertyBell Law Group fought to enforce the original indemnity agreement — and successfully restored full legal cost coverage through court order.
How LibertyBell Law Group Protects Executives
- Reviews your indemnification agreement and company bylaws
- Negotiates stronger indemnity clauses and board obligations
- Coordinates with D&O insurers to ensure parallel protection
- Prepares legal defense plans in advance of controversy
- Litigates to enforce indemnity if wrongfully denied
Essential Clauses Every Executive Should Demand
- Advancement of Legal Fees — Not just reimbursement after trial
- Mandatory Board Indemnity — Without discretionary vote
- Survival Clause — Indemnity rights survive termination
- Coverage for Investigations — Not just formal charges
- Legal Fees to Enforce Indemnity — Covered if company resists payment
Free Indemnity Review for Executives
Not sure if your agreement truly protects you? LibertyBell Law Group offers a free, confidential indemnification and D&O coverage review for executives. Don’t wait until you’re in a lawsuit to find out you’re on your own.
Conclusion: Know the Difference Between Promised Protection and Real Protection
Indemnification sounds ironclad — until it’s challenged. LibertyBell Law Group ensures your agreement is enforceable, funded, and airtight. Because when your name is on the lawsuit, your protection needs to be more than just words on paper.