Traditional Exclusions in D&O Insurance Policies

Most policies for D&O insurance, also known as Directors and Officers insurance, include a professional indemnity exclusion that prohibits coverage for claims asserting the infringement of duty other than those owed by a director or an officer. Managers who are also professionals will need to warrant these obligations under a separate professional indemnity policy.

Insured Versus Insured Exclusion

Many D&O insurance policies contain a carve-out to the exclusion and extend coverage to claims brought in the name of the corporation, such as a shareholder derivative action. Insured exclusions are defined as:

  • Exclusion of claims bought by one person covered by insurance against another, including by the corporation against a director
  • Significant because a director’s duties are owed to the company
  • Actions brought by the company that are a potential source of liability

Most Directors & Officers insurance plans also cover exclusions for willful breach of duty, misuse of information by directors and officers, or misuse of position.

Function of D&O Policies

The core function of D&O insurance is that it allows directors and officers to take risks without assuming excessive liability. However, it does not grant them consent or allow them to engage in acts they know are wrong.

For Directors & Officers insurance, use the services of an insurance agent who can offer protection for your assets and those of your directors and officers prior to threats occurring.

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