Directors and Officers Coverage, Exclusions and the Magic Words "In Fact"

Here is a terrific article on the lessons about directors and officers insurance that should be taken from a series of rulings that eventually ended coverage for the Stanford Financial executives. I have said many times that because the scope of D & O insurance is so dependent on the scope of the exclusions, it is important to analyze and understand them when the policy is being acquired, and not wait until after a claim is made, when it may well be too late. That is, in essence, what happened to these executives; as the authors of the article point out, had they sought narrower exclusionary language when they acquired the policy, they might well have avoided the rulings against them that ended their insurance coverage. Of more precise importance, I have discussed in prior posts the significance of exclusions that apply if a certain conduct “in fact” happened; the article addresses the meaning of this language in depth, and contrasts it to other wording that, if used instead, would narrow the scope of the exclusion and, by extension, expand the scope of the coverage.