Although uncommon, a few basic D&O policy forms (and even fewer endorsements) contain exclusions specifically aimed at claims related to FCPA-targeted practices. A deliberate violation of the Act is a felony that is precluded by the criminal-acts exclusion. The example below goes beyond claims based on FCPA violations by excluding all types of claims based on or involving payments, political contributions or other instances of influence buying, regardless of the legality of such actions.

(16) based upon, attributable to, arising from or in any way involving:

(a) payments, commissions, gratuities, benefits or any other favors to or for the benefit of any full- or part-time domestic or foreign governmental or armed services officials, agents, representatives, employees or any members of their family or any entity with which they are affiliated; or

(b) payments, commissions, gratuities, benefits or any other favors to or for the benefit of any full- or part-time officers, directors, agents, partners, representatives, principal shareholders, or owners or employees, or affiliates (as that term is defined in the Securities Exchange Act of 1934, including any of their officers, directors, agents, owners, partners, representatives, principal shareholders or employees) of any customers of the Insured Organization or any members of their family or any entity with which they are affiliated; or

(c) Political contributions, whether domestic or foreign.

Royal Insurance RSUIFP-RS-00002 (4/93)

In contrast, the exclusionary language in the example below refers only to fines and penalties imposed in conjunction with political contributions, payments, commissions, or gratuities. It is silent as respects any potential actions brought against the directors and officers arising out of such activity that is not a violation of law.

The INSURER shall not be liable to make any payment for ULTIMATE NET LOSS arising from any CLAIM(S) made against any DIRECTOR or OFFICER:

(A) (2) for any fines or penalties imposed in conjunction with political contributions, payments, commissions or gratuities;

AEGIS 6100 (1/98)

Some exclusions that appear to exclude only FCPA-targeted activity go well beyond the Act, and can be broadly interpreted to exclude a wide range of otherwise-legitimate activities. Many firms are actively engaged in political issues, often spending large sums in political-party contributions; and payments and commissions are frequently and legitimately made to customers, suppliers and any number of other corporate constituencies. Because the exclusion sometimes contains language precluding such alleged activity, even loss associated with a successful defense of such activity could be excluded.

Most of these exclusions are too broadly worded and unduly restrict coverage. Unless the insurer can justify their existence or give a substantive price advantage by including them in the policy, these exclusions should be avoided.