D&O Coverage: The Devil Is In the Details
A five-paragraph opinion by the New York Appellate Division suggests the potentially devastating consequences of ignoring the fine print of Directors & Officers Liability insurance policies. In Associated Community Bancorp., Inc., et al. v. St. Paul Mercury Ins. Co., 2014 NY Slip Op 04697 (App. Div., First Dept.), the court held that a bank caught up in the Madoff debacle had no coverage, not even for defense costs, for investor claims.
The court devoted one paragraph to each of the four exclusions which it found eliminated coverage for the investors’ claims. Three of those exclusions are fairly unique to Bankers Professional Liability Insurance Policies and are not found in most D&O policies. However, the Court’s final ground for denying coverage was the policy’s “Personal Profit and Advantage Exclusion” (often called the Profit/Advantage Exclusion).