An exclusion found in directors and officers (D&O) liability policies that
precludes coverage for suits by national and state banking authorities against
directors and officers. The exclusion came into use during the mid-1980s when,
in the wake of widespread financial institution insolvencies, regulators such
as the Federal Deposit Insurance Corporation (FDIC) took control of failed banks.
In their attempts to recover lost assets, regulators frequently initiated lawsuits
against former directors and officers, recognizing that D&O policy proceeds
would be available. However, the exclusion is no longer common, since the kinds
of losses experienced during the savings and loan crisis of the late-1980s are
much more unusual and therefore do not pose the same type of large-scale underwriting
exposure as was once the case.
Links for IRMI Online Subscribers Only:
D&O Coverage Guide