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failure to insure exclusion

A failure to insure exclusion is found primarily in directors and officers (D&O) liability policies and, to a lesser extent, in public officials liability policies.

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This exclusion precludes coverage for claims made against insureds when claimants suffer losses resulting from failure to purchase insurance coverage, provided such coverage was available. Many have criticized the rationale for this exclusion because intentional self-insurance—even if an organization suffers a significant loss—is often a sound business decision, especially in the long term. In recent years, however, underwriters have become more amenable to removing this exclusion, provided insureds submit a summary of the organization's insurance program.