Personal Profit Exclusion — an exclusion contained in nearly all directors and officers (D&O) and
fiduciary liability insurance policy forms. The exclusion precludes coverage of
claims against insureds who attain personal profit or financial advantage to
which they were not legally entitled. For example, assume that an outside
director sitting on a corporate board uses inside information to assist his own
corporation in obtaining a contract with the company on whose board he sits. If
a stockholder were to bring a claim against that director, a personal profit
exclusion may preclude coverage for the claim. However, few policies apply the
personal profit exclusion unless the claim of personal profit is factually
established. From a practical standpoint, this means that coverage to defend
against allegations of illegal personal profit applies, until it is proven that
the insured did, in fact, obtain such profit. Accordingly, the policy always
excludes actual damages that resulted from any illegal conduct.