Filed Under:Agent Broker, Coverage Issues

D&O Insurers Scrutinize Regulatory Exclusions

For directors and officers liability insurers facing a potential influx of claims arising from lawsuits that banking regulators are filing against their insureds, a key question is whether regulatory exclusions in their policies will hold up.

Such exclusions were pretty heavily litigated during the Savings & Loan crisis, according to Kevin LaCroix, a broker with OakBridge Insurance Services in Beachwood, Ohio, who also reported that the coverage cases were ultimately concluded in favor of insurers.

Agreeing with Mr. LaCroix about the FDIC’s sophistication on coverage issues, Kevin Mattessich, managing partner in the New York office of Kaufman Dolowich Voluck & Gonzo, suggested that the FDIC could engage in some forum shopping. “There are definitely some competing decisions out there on what was timely notice—whether something is a claim made in the period or not, whether something is a loss discovered during the policy period, etc.,” he said.

Speaking at the D&O Seminar of the Professional Liability Underwriting Society early this month, Brian McCormally, a partner at Arnold & Porter in Washington, cautioned insurers about their use of regulatory exclusions. “I have run into a lot of cases recently where banks and bank holding companies have the ability to purchase a tail on their existing policies,” he reported, suggesting that carriers need to be careful if they present renewal policies with regulatory exclusions on them.

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