Admiral Insurance Co. DO 1200 (07-96)

The most common uninsurable loss elements are:

·   Fines and penalties imposed by law. Almost all D&O insurers exclude coverage for both civil and criminal fines and penalties.

·   Punitive and exemplary damages. Some insurers may include coverage for such damages within the Loss definition or by endorsement. When coverage is granted, it is usually to the extent allowable by governing law or by applicable law in the most favorable jurisdiction.

·   Multiplied damage awards. A multiple of compensatory damages is sometimes awarded by the courts in certain types of claims (such as those involving anti-trust violations). Because multiplied damages are punitive in nature, most D&O insurers exclude coverage for them.

·   Taxes. Payment of taxes is a corporate responsibility under city, state, or federal law. Even if a D&O policy did not list tax liability as uninsurable loss, most state and federal courts would consider such liability to be outside the scope of coverage.

·   Matters Deemed Uninsurable Under Law. Includes any other types of loss for which public policy or statute may preclude insurance coverage.

Some D&O policies also exclude damages for which the Insured is not liable. Such damages might include expenses incurred by the directors and officers which were determined by the courts to be non-indemnifiable by the corporation. In addition, some policies specifically state that claim investigation expenses are not considered to be Loss under the policy.

Even when the definition of Loss excludes the damages elements described previously, some insurers will still pay for the defense of claims in which such damages are alleged.