Directors and officers insurance coverage pays on behalf of a company’s management. Specifically, the policy covers claims of wrongful acts such as theft of trade secrets or violation of state security laws.
However, exclusions do exist as part of the policy. Exclusions can vary per policy, and often the frequency of certain types of losses will dictate which ones are included. Listed below are some of the most common types of exclusions you will probably see in a Directors and Officers Insurance policy:
- Libel or slander.
- The gain of any personal profit to which one was not legally entitled to.
- Profits resulting from the unauthorized purchase or sale of company securities.
- Dishonesty on the part of those insureds, only upon proof of deliberate dishonesty.
- Failure or omission to effect or maintain insurance.
- Bodily injury, sickness, disease or death of any person, or damage/destruction to any property.
- Payments (monetary and non-monetary favors) to governments, and for payments to officers, directors, agents, owners, partners, representatives or employees of the company.
- Acts of racketeering and corruption.
- Offers to purchase securities of the company at a premium over their current market value.
Typically there will not be coverage for claims involving these liabilities. It’s important to know that the basis of directors and officers insurance is to give coverage to “wrongful acts” that will be stipulated in the policy. As a rule of thumb, intentional illegal actions and illegal profits will not be covered. Remember though that exclusions will vary by policy and organization, and to get a clear picture of coverages and gaps, it is best to speak with an agent directly.
Additional Reading: 4 Reasons Directors And Officers Insurance Is Vital To Your Company