Exclusions to Coverage Under “Wrongful Acts”
- Antitrust: Under D&O policies, intellectual property and antitrust claims are expressly excluded from coverage except where an officer or director is named.
- Insured vs. Insured: Insurers will exclude coverage for claims that address lawsuits between Directors and Officers and shareholders of the same company to avoid any collusion and fallout from infighting at the company.
- Misconduct: Losses related to criminal or deliberately fraudulent activities are expressly excluded from D&O policies as well as claims where an individual insured acquires illegal profits or remuneration. Defense for such a Loss, however, is typically covered until final adjudication in the underlying action is established to be criminal and/or fraudulent conduct.
- Other Insurance: D&O policies most commonly contain exclusions pertaining to coverage that is offered in other policies. Insurers typically look to “other insurance” provisions where conduct falling within E&O or CGL “personal and advertising injury” coverage is implicated.
- Prior Knowledge: Insurers restrict or exclude coverage for claims or conduct that the insured had known or may know prior to completing the policy application. Bedivere Ins. Co. v. Blue Cross & Blue Shield of Kansas, 2021 U.S. Dist. LEXIS 41466, *17 (D. Kan. Mar. 5, 2021).
Defense Costs Limitations Under D&O Policies
Under an “Allocation” provision, D&O policies may expressly exclude defense cost reimbursement for uncovered portions of a claim or proportionately determine the amount of defense reimbursement between covered and uncovered aspects of a claim under an “Allocation” provision.
“Personal/Advertising Injury” Coverage for Antitrust Claims
“Personal and advertising injury” coverage, while unavailable for antitrust claims per se, may be implicated by other tortious claims asserted in those suits. The causes of action asserted in tandem with counts for unfair competition or tortious interference may trigger defense duties under one or more of the “personal and advertising injury” offenses. COMSAT Corp. v. St. Paul Mercury Ins. Co., 1998 U.S. Dist. LEXIS 2916, *14–15 (D. Minn. Mar. 6, 1998).
Discrimination
Equals “disparate or differential treatment”: Discrimination may be factually implicated by allegations of disparate economic treatment. Federal Ins. Co. v. Stroh Brewing Co., 127 F.3d 563, 568 (7th Cir. (Ind.) 1997) (coverage for undefined “discrimination” was sufficient to trigger defense for underlying case asserting “price discrimination”).
Unfair Competition
Common law unfair competition includes many varieties of conduct beyond “passing off.” It can encompass torts that in the process lessen equal competition in the market. Hewlett-Packard Co. v. CIGNA Property & Cas. Ins. Co., 1999 U.S. Dist. LEXIS 20655, *15–19 (N.D. Cal. Aug. 24, 1999) (“‘Unfair competition . . . can be found when the defendant engages in any conduct that amounts to a recognized tort and when that tort deprives the plaintiff of customers or other prospects.’”).
Malicious Prosecution
“Malicious Prosecution” refers to prosecutions begun in malice without probable cause to believe that the charges can be sustained. An action for damages is brought by a person against whom the action was instituted maliciously and without probable cause. The cause of action is initiated after termination of the prosecution of such suit in favor of person claiming damages. Ethicon, Inc. v. Aetna Casualty & Surety Co., 737 F. Supp. 1320, 1329 (S.D.N.Y. 1990) (underlying suit limited causes of action under the Sherman Act, but the court determined that indemnity was triggered as the “complaint alleged facts and claims that could be said to comprise a common law claim for malicious prosecution”).
Reputation Torts
Disparagement
In the 2001/2013/2017 ISO CGL Coverage B for “Personal Injury and Advertising Injury” are part of a combined definition that encompass any form of disparagement in an actionable publication causing injury. Liberty Mutual Ins. Co. v. OSI Indus., Inc., 831 N.E.2d 192, 199 (Ind. Ct. App. 2005) (insurer required to defend underlying action alleging violations of Illinois Consumer Fraud and Deceptive Business Practices Act because statements that questioned who had ownership rights to exclusive secret technology were disparaging).