Bodily Injury/Personal Injury/Property Damage/Advertising Injury (BI/PD/PD/AI)—Archived Article

October 2004

All D&O policies contain exclusions for loss associated with or arising out of claims that allege bodily injury and property damage. These exclusions focus on specific types of injury rather than a particular type of wrongful act. Most D&O policies also exclude some types of personal injury and/or advertising injury. An example of exclusion wording that excludes bodily injury, property damage, and certain personal injury offenses follows:

The Insurer shall not be liable to make any payment for Loss in connection with a Claim made against an Insured:

(f) for emotional distress or for injury from libel, slander, defamation, disparagement, or a violation of a person's right of privacy; …

(k) for bodily injury, sickness, disease, or death of any person, or damage to or destruction of any tangible property, including the loss of use thereof;

National Union 70320 (4/98)

Because D&O policies provide a form of errors-and-omissions-liability coverage, it is reasonable that the policy forms exclude claims based on bodily injury, property damage, and personal injury, all of which may be at least partially insured under commercial general, automobile, and umbrella liability policies.

The language used in D&O policies to exclude bodily injury, personal injury, property damage, and advertising injury rarely matches exactly the language that grants such coverage under the standard ISO CGL policy. Some D&O policies exclude an extensive list of injuries; others exclude only a handful. The following side-by-side comparison of the National Union exclusion shown previously and definitions contained in the 2001 version of the ISO CGL policy coverage grant illustrates this point.

D&O insurers may not necessarily intend to exclude exactly that which is covered by the CGL policy. In fact, there appears to be several potential overlaps in coverage. For example, the property damage exclusion in the National Union D&O policy noted previously closely matches the standard CGL insuring agreement as respects damage to or destruction of tangible property including loss of use thereof. However, the exclusion is silent regarding loss of use of tangible property that is not physically injured, thereby creating a potential overlap of coverage with the CGL policy. Such overlaps in coverage also may exist with respect to certain types of personal and advertising injury.

Coverage under a D&O policy is generally broader than coverage under the standard CGL policy, especially if the CGL policy contains endorsements precluding coverage for claims based on personal and advertising injury (CG 21 38), abuse or molestation (CG 21 46) or employment-related practices (CG 21 47). Obviously, D&O coverage for any claim would be subject to other policy provisions and would have to be based on a wrongful act by an insured individual.

There are other notable characteristics of the wording of these exclusions. Consider these two examples:

The Underwriter shall not be liable for Loss on account of any Claim made against any Insured Person:

5.  based upon, arising out of or attributable to bodily injury, mental anguish, emotional distress, sickness, disease or death of any person or damage to or destruction of any tangible property including loss of use thereof;

Steadfast Ins. Co. STF-DO-109-A (CW) (12/95)

The Company shall not be liable for Loss on account of any Claim made against any Insured Person:

(b) With respect to Insuring Agreements A and B:

(5) for bodily injury, mental or emotional distress, sickness, disease or death of any person or for damage to or destruction of any tangible property including the loss of use thereof;

Great American D2100 (1/99)

Language in the first example refers to claims “based upon, arising out of, or attributable to” a list of specific types of injury. This wording contrasts with language in the second example, which refers only to claims made against the insured individuals “for” certain specified injuries. The language in the first example is far more restrictive. Exclusions that contain the prefatory “for” language are preferred because they may not exclude coverage for some derivative-action or third-party claims that are indirectly based on bodily injury, property damage or other specified injuries.

A few older D&O policies contain language specifically providing that claims of bodily injury and property damage are not excluded when made in the form of a derivative action. This provision is illustrated in (1)(a) of the exclusion that follows. Note also in (1)(b) the exception to the exclusion for claims that allege securities violations.

(I) for bodily injury, sickness, disease or death of any person, or for damage to or destruction of any tangible property including loss of use thereof. This Section III. Exclusion (b)(I) shall not apply

(a) to any Claim in the form of a derivative action by any security holder of the Company acting independently and without the solicitation or assistance of the Company or any Insured Person, or

(b) to the extent such Claim is for any actual or alleged violation of the Securities Act of 1933, the Securities Exchange Act of 1934 or any state securities statute; or

Aetna F-2305 (12/91)

Such affirmative language is highly desirable. Unfortunately, most policy forms do not specifically address this issue.

Bodily-injury, property-damage, personal-injury, and advertising-injury exclusions may be combined into a single exclusion, as in the National Union example at the beginning of this discussion. They also may appear as separate distinct exclusions, having, in most cases, the same overall effect as a unitary exclusion. The exception is when a policy uses multiple individual exclusions that are inconsistent, using “for” language in the personal-injury exclusion, and a more-encompassing reference to claims “based upon or attributable to or arising from” in the bodily-injury and property-damage exclusions. This is illustrated in the following example.

The Insurer shall not be liable to make any payment for Loss, including Defense Expenses, in connection with any claim:

(a) based upon or attributable to or arising from any actual or alleged false arrest, detention or imprisonment, malicious prosecution, libel, slander, defamation, violation of any right of privacy, wrongful entry or eviction or other invasion of any right of private occupancy;

(b) based upon or attributable to or arising from any actual or alleged bodily injury, sickness, mental anguish, emotional distress, disease or death of any person or for damage to or destruction of any tangible property including the loss of use thereof;

Fidelity & Deposit S-9126 (Ed. 12/95)

It is interesting to note that this exclusion is broader than the same exclusion in the insurer's previous edition of the policy form. In the earlier edition, the personal injury exclusion (a) contained “for” prefatory wording and the bodily injury exclusion (b) did not contain the wording “actual or alleged.”