Directors and Officers Liability Exclusion Prevents Double Recovery

July 13, 2010

Under a Habitational Association Directors and Officers Liability Endorsement, there is an exclusion that states, “This coverage does not apply… h. To any claims for which your officer or director receives indemnity from you or has a right to be indemnified by you.”

I am trying to think of a scenario when exclusion h would apply. Any specific examples would be helpful.

Michigan Subscriber

Exclusion h. is designed to prevent a director or officer from receiving a double recovery. This form provides D&O liability coverage under Section II, Who Is an Insured, for both the individual directors and officers and the named insured association. Therefore, if the association bylaws provide that the association indemnify directors and officers for damages arising from claims against them, the individual directors and officers will not be indemnified by the insurance company as well. The insurance company, in such a situation, would indemnify only the association.