capacity exclusion

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On May 11, 2026, the Supreme Court of New Jersey issued a highly anticipated ruling, holding that when an individual’s actions span both insured and uninsured capacities, that overlap in role-based conduct is sufficient to trigger the D&O policy’s capacity exclusion. Affirming the July 9, 2024, Appellate Court decision, with modifications, the Court held that the exclusion properly precluded coverage for an individual acting in multiple capacities, specifically regarding underlying self-dealing claims. The D&O Diary previously covered the appellate decision, which had completely denied coverage in full.

Continue Reading New Jersey Supreme Court Affirms Broad Reading of D&O “Capacity” Exclusion

D&O insurance provides coverage for individuals to the extent they are acting in their capacities as directors and officers of their companies. The policies do not provide coverage when the individuals are acting in other capacities. A recent decision from a New Jersey appellate court highlights the coverage questions that can arise when individuals are alleged to be acting in multiple capacities. The court concluded that coverage was entirely precluded for an individual who was acting multiple capacities. As discussed below, the decision raises interesting questions.

Continue Reading D&O Insurance Coverage Precluded for Individual Acting in Dual Capacities

Commercial enterprises sometimes are organized in complex structures consisting of multiple, legally separate legal entities. The legal separation between the various entities can be significant in a variety of ways. One particular context within which these separate legal identities can be very important is in the D&O insurance context, as the insurance may be structured to apply to specified entities (and therefore not to others).

In the D&O insurance context, the availability of coverage for individual directors or officers may depend on the entity within the structure on whose behalf the individuals were acting – that is, the coverage question will depend on the “capacity” in which the individuals were acting. A recent decision by the New York (New York County) Supreme Court Commercial Division highlights the importance of these capacity issues and underscores that the capacity in which an individual was acting can be coverage determinative. The court’s February 2, 2021 opinion can be found here.
Continue Reading D&O Insurance Coverage Barred for Execs Not Acting in an Insured Capacity