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Family Exclusion

Family Exclusion


Family Exclusion — an exclusion found within directors and officers (D&O) liability policies written to cover privately held companies. The family exclusion precludes claims made by one family member/insured against another family member/insured. Its intent is to preclude coverage for claims involving either collusion or infighting. However, to broaden coverage, underwriters will sometimes agree to modify the exclusion so that only claims from members of the same generation are excluded. The effect of this modification would therefore be to allow coverage if, for instance, a son were to sue a grandfather or a daughter were to sue a father. In such instances, it is likely (especially when a member of the younger generation sues) that the younger generation will not have control of the business and may in fact be suing to prevent gross mismanagement of a family enterprise. Thus, when a member of a different, and typically younger, generation brings a claim, the possibility that it involves collusion or infighting is substantially reduced, which is why underwriters sometimes agree to this modification.

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