A standard exclusion found in most private company directors and officers insurance policies precludes coverage for claims brought by one insured against another insured – the so-called Insured vs. Insured exclusion. The exclusion typically includes several coverage carve-backs preserving coverage for certain types of claims for which the exclusion would otherwise preclude coverage. One relatively standard coverage carve-back preserves coverage for claims brought by a former director or officer after the individual’s service to the company terminated. While the inclusion of this type of coverage carve-back is fairly standard, the wording of the carve-back can and sometimes does vary in ways that can significantly affect whether or not coverage is available for particular claims.

In a December 13, 2017 decision (here), Central District of California Dean D. Pregerson concluded that an underlying dispute between a former director and his former company did not fall within the coverage carve-back to the Insured vs. Insured exclusion in the company’s D&O insurance policy and therefore that there was no coverage under policy for the underlying claim. The decision highlights the importance of the specific language used in the coverage carve-back.
Continue Reading D&O Insurance: Coverage Carve-Backs in the Insured vs. Insured Exclusion