D&O Liability Exclusions: What Are Common Exclusions?

A business run by a team of executives or senior employees needs Directors & Officers (D&O) Liability insurance in case lawsuits arise. D&O insurance protects each executive from personal responsibility if litigation occurs. Here's what you should know about D&O coverage and its exclusions.

Standard D&O Exclusions

Each company that offers diverse business insurance has its own version of D&O coverage, along with specific exclusions as to which items are not covered. Standard exclusions tend to be for either action within the company's control or extremely beyond anyone's control.

Deliberate actions that lead to criminal charges, for example, are not covered. Breach of contract is another exclusion in which your policy will not pay for legal costs. Nor are fines and penalties for punitive damages covered.

Another exclusion typically found in D&O policies includes acts prior to the coverage period of the policy term. Catastrophic events such as wars and extreme natural disasters are also not covered by D&O.

If your company is accused of wrongful termination by an ex-employee, it would not be covered by D&O insurance. You need a different type of coverage known as Employment Practices Liability Insurance (EPLI) to pay those legal costs. If your firm is sued for defamation, libel, or slander, it would be covered by your general liability insurance, not D&O.

Additional Types of D&O Exclusions

While many standard exclusions are fairly obvious, here are some of the more complex exclusions that require a close review of your policy:

• Antitrust - Price-fixing with competitors and other antitrust violations are complex accusations that usually involve specific criteria by the insurer to be covered or excluded.
• Conduct - Various types of unethical or unprofessional behavior can fall under conduct exclusions. Examples of conduct not covered include fraud and embezzlement.
• Commissions - According to the Foreign Corrupt Practices Act, it's illegal for a U.S. company to issue payments to foreign government officials in order to gain a favorable business position. Insurers won't cover legal costs for these allegations.
• Defense costs - Your insurer will only cover your company's legal costs that pertain to what's covered in your policy, with no exclusions.
• Failure to maintain insurance (FTMI) - Since many companies are turning to self-insurance, it's less common for FTMI to show up as an exclusion in D&O coverage. Nevertheless, if insurance was available for a certain issue and you didn't include it in your coverage, it still won't be covered.

Choosing the Right D&O Coverage

A business owner must consider D&O coverage as a form of risk management to protect the personal assets of directors and officers. D&O applies to both corporations with board members and smaller companies with senior employees. Since D&O insurance can be detailed with different types of exclusions, it helps to work with an insurance expert who can help simplify the coverage selection process.

Get D&O Protection Now with Fuller Insurance!

Running a business involves a mix of risks and rewards. Make sure you have your risks covered with matching insurance. Contact our agents at Fuller Insurance Agency today to learn more about how our D&O insurance protects your business and gives you peace of mind. Get a quote now!