The insured v. insured exclusion clause is a prominent feature in Directors and Officers (D&O) insurance policies. Recently, this exclusion has been put to the test in the United States Bankruptcy Court for the Northern District of Illinois. The court evaluated its application in the case concerning a bankrupt insured condominium association’s former officers and board members. The area of contention revolved around whether the policy’s definition of an ‘Insured’ extends to bankruptcy trustees and debtors-in-possession.
The court, adhering to the Illinois law, proclaimed that the insured v. insured exclusion of a D&O policy indeed can bar coverage for a trustee’s claims against a bankrupt insured condominium association’s former officers and board members. Critical to this judgment was the court’s interpretation of the term ‘Insured,’ which was found to include bankruptcy trustees and debtors-in-possession.
This pivotal judgment sheds light on the power of precise language in policy construction and the far-reaching consequences it may have in the realm of liability coverage. The insured v. insured exclusion barring coverage owing to a comprehensive definition of ‘Insured’ that includes trustees and debtors-in-possession can profoundly impact future liability claims involving the same.
The verdict by the court zooms into the crux of potential disputes arising from the relative definition of ‘Insured’ under policy exclusions. The court’s conclusions highlight the legal perspective that hinges upon the exact wording and specific inclusion of roles within insurance policies. This underlines the necessity for corporations, law firms and individuals alike to critically examine the specifics of their coverage policy.
For an in-depth read on the ruling refer to this article on JD Supra by Wiley Rein LLP.