Insured Versus Insured Exclusion

The insured versus insured exclusion in Directors and Officers Liability Insurance is a clause that prevents the insured individuals from making claims against each other. This exclusion typically disallows coverage for lawsuits brought by one insured party (e.g., a director) against another insured party (e.g., fellow directors, officers, or the company itself).

Example #1

For instance, if a director of a company files a lawsuit against another director alleging mismanagement, the insured versus insured exclusion would likely prevent the insurance policy from covering the legal expenses or settlement of that claim.

Misuse

It is important to protect against misuse of the insured versus insured exclusion because it could potentially lead to conflicts of interest or abuse. If this exclusion is misused, it could prevent legitimate claims from being addressed within the insurance coverage, leaving individuals without the protection they expect.

Benefits

The insured versus insured exclusion can benefit the insurance company by avoiding situations where collusion or fraudulent claims are made internally within the organization to take advantage of the insurance coverage. By restricting coverage for claims between insured parties, the exclusion helps maintain the integrity of the insurance policy.

Conclusion

Understanding the insured versus insured exclusion is crucial for policyholders to be aware of its limitations and implications. While this exclusion aims to prevent conflicts of interest and fraudulent claims, it is essential to ensure that legitimate claims are not unfairly excluded.

Related Terms

Directors And Officers InsuranceExclusionPolicyholder