NEW YORK—Directors and officers liability insurance providers have changed the ways they promise to protect corporate leadership from liability-related litigation, but experts say buyers should be aware of the nuances of the coverage.

Dan Bailey, a member of Bailey Cavalieri L.L.C., who represents directors and officers, corporations and insurers, said he's seen a greater change in the basic D&O policy terms during the past 12 months than in the past 25 to 30 years. “It's really remarkable, the number of enhancements that are now commonplace,” Mr. Bailey said during a Feb. 2 panel discussion he moderated at the 2011 Professional Liability Underwriting Society's D&O Symposium in New York.

For example, D&O insurance long has promised to cover expenses such as the legal settlements arising from allegations that company managers didn't act in their shareholders' best interests. Insurers last year introduced new policies that broadened the definition of what triggers a claim to include formal and informal investigations, including the U.S. Securities and Exchange Commission. But such investigations aren't always clear-cut, and sometimes the SEC will solicit information from companies without saying why, experts said.

Kenneth W. Ross, executive vp at brokerage Willis North America, a New York unit of London-based broker Willis Group Holdings P.L.C., said the enhancement means the onus is now on the insured to give notice when investigations begin.

“The good news is we have more coverage” than five or 10 years ago, Mr. Ross said. “The bad news is we have potential problems.”

Mr. Ross said policyholders should be aware of the issue and take steps such as softening the notice provisions in their contracts with insurers. For example, a policy might cover claims made within 60 to 90 days after an investigation begins. Another way to address the problem might be to require that the policyholder give notice only in the event that senior officers, such as the general counsel, are aware of the investigation, Mr. Ross said.

“People have differences of opinion as to whether ambiguity” is better for the insureds, said Michael Price, senior vp at Arch Insurance Group, a division of Bermuda insurer and reinsurer Arch Capital Group Ltd. “It allows for maximum negotiation...for making sure coverage can be available at least to some extent,” he said.

Mr. Price added that the definition of what triggers a claim might need more clarification, because it can be hard to identify the absolute trigger of informal investigations.

The panelists discussed other questions about D&O coverage that leave room for debate. For example, Mr. Ross described the hypothetical situation that a merger or acquisition deal is priced at $10 a share, the shareholders sue alleging that managers should have gotten $12 a share, and the lawsuit eventually results in a settlement for a $2 per share price increase. Mr. Ross said a recent court ruling addressed the way D&O policies exclude coverage related to such share price increases. “There are still a lot of open questions here,” he said.

The one clear-cut point that emerged in the panel discussion was that D&O policies are confusing.

Mr. Bailey said many people don't completely understand how D&O works—even some directors who think they understand the coverage.

“The communication function is critical, not just between the broker and underwriter but more importantly with the insured,” Mr. Bailey said. He said misunderstandings and misperceptions about D&O are “enormous,” even among people who “purport to” know about it. “The communication between insureds and insurers is lacking, and very, very important,” Mr. Bailey said.

Experts recommend that company managers speak directly with their insurance providers rather than relying solely on information about their coverage from their brokers.