The History of Conduct Exclusions

The conduct exclusions in directors’ and officers’ (D&O) liability policies and errors and omissions (E&O) policies – which eliminate coverage if an insured committed some illegal or improper act – generally are drafted to apply only when there is a final adjudication in the underlying litigation that excluded conduct occurred. This means that trying securities fraud actions and other claims for economic damages predicated upon intentional conduct carries a risk of losing coverage in the event of an adverse judgment.