By Barry J. Reiter of Bennett Jones LLP
Directors’ and officers’ insurance contracts are often riddled with clauses that, while seemingly reasonable and well-intentioned, can lead to bizarre court decisions
Previous columns [Ed.: In Lexpert magazine.] have discussed how directors’ and officers’ insurance programs are “just contracts.” Although the exercise may seem surreal, in circumstances in which the actual insurance policies are typically not available for months after they have been purchased, courts apply normal contract interpretation principles to insurance programs, seeking to discern the “intentions of the parties.” You must, therefore, insist upon receiving your policy documents and you should read them carefully.
An example of what can happen otherwise is illustrated by “insured vs. insured” clauses, which find their way into virtually every D&O policy form in the first instance. These provisions state that there is no insurance coverage in a lawsuit brought by a person or company potentially insured under the policy against anyone else also named in the policy. The purpose of these clauses is