bump-up exclusion

Following the purchase of one corporation by another, shareholders of the acquired organization frequently bring lawsuits alleging that the purchase price paid by the acquirer—and thus the price received by the acquiree's shareholders—was too low. In some situations, insureds intentionally negotiate a below-market acquisition price, and then allow insurance proceeds paid in response to the inevitable shareholder objection to supplement that price to achieve a fair-market value in the end. Bump-up exclusions in directors and officers (D&O) liability policies preclude coverage for such losses. These exclusions were developed by insurers who perceive that such claims are essentially business risks and are beyond the scope of intended coverage under a D&O policy.