In the event of payment under this Liability Policy, the Company shall be subrogated to all of the Insured's rights of recovery against any person or organization to the extent of such payment and the Insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. The Insured shall do nothing to prejudice such rights.

                                                                          St. Paul Travelers, LIA-3001 (07/05)

In case of payment of Loss by the Insurer hereunder, the Insurer shall be subrogated to the amount of such payment to the Insured's right of recovery against any other person or organization for such Loss, and the Insured shall execute all papers required, and shall do everything that may be necessary to secure and preserve such rights, including the execution of such documents necessary to enable the Insurer effectively to bring suit in the name of the Insured. In no event, however, shall the Insurer exercise its rights of subrogation against an Insured under this Policy unless such Insured has committed a deliberate criminal act, or deliberate fraudulent act, or obtained any profit or advantage to which such Insured was not legally entitled, and as to any of the foregoing, only as evidenced by a written statement or written admission by such Insured or a judgment or other final adjudication in the underlying action or in a separate action, alternative dispute resolution process (including one pursuant to Section XVI) or other proceeding.

                                                               Arch Insurance Group, 00 ATL0001 (04 05)

The first example contains the type of language found in many D&O policy forms. The second example, found in only a few policy forms, includes an interesting addition of language. The added language prevents the insurer from subrogating against any insured under the policy unless the insured has admitted to or has been convicted of a criminal or fraudulent act or has gained illegal personal profit or advantage. While the notion that an insurer would attempt subrogation against its own insured may seem unusual, the unique relationship among the corporation, its directors and officers, and the insurer would not always preclude such action. While rare, insurers have in fact successfully subrogated against their own insureds, and they have attempted to do so with some frequency.

A corporation's bylaws often allow or mandate a broad range of indemnification, yet it is possible the corporation may choose not to indemnify in a particular situation. If the insurer is obligated to pay loss on a direct basis to the individual insureds, it is conceivable the insurer might seek recovery for the deductible amount that would have applied if the claim had been paid under the corporate-reimbursement section..

Under some policy forms that provide only individual-liability (i.e., Side-A) coverage, the policy expressly grants the insurer the right to bring suit against the corporation for failure to indemnify. In the following example, the corporation is not an insured under the policy.

In the event of any payment under this POLICY, the INSURER shall be subrogated to the extent of such payment to all the INSUREDS' rights of recovery, and the INSUREDS shall execute all papers reasonably required and shall take all reasonable actions that may be necessary to secure such rights including the execution of such documents necessary to enable the INSURER effectively to bring suit in the name of the INSUREDS, including but not limited to an action against the COMPANY for nonpayment of indemnity due and owing to the INSUREDS by the COMPANY.

                                                                                                CODA 01 (5/96)

As noted earlier, individual insureds can be the subject of a subrogation attempt in certain situations. Because some exclusions are subject to severability provisions that prevent the actions of one insured individual to be imputed to another, it is possible for the insurer to pay loss associated with successfully defending one or more directors or officers yet deny coverage for those individuals committing the excluded acts. The insurer might subsequently attempt to subrogate against the guilty director(s) or officer(s) when their actions were found to be the basis of the claim.

A waiver of subrogation specifically in favor of the directors and officers and the company, as opposed to just insureds under the policy as shown in the Arch policy cited, is most desirable. The specific reference to directors and officers prevents the insurer from subrogating against a guilty director or officer who was not insured for a specific wrongful act.

In a few policy forms, the subrogation provision describes the method by which subrogation recoveries are allocated.