Recent cases have highlighted pitfalls in the way claims against
companies and their officers and directors can be settled that
impact coverage under D&O policies. The failure to appreciate
the effect of settlements on coverage matters can result in the
loss of coverage just when the matter is being concluded, an
unfortunate and costly consequence for unaware policyholders. These
pitfalls can almost always be avoided by giving prompt
consideration to potential D&O coverage issues, long before
entering into any settlement, and then revisiting the D&O
policies before settlement negotiations begin.
"Disgorgement" is not covered
Disgorgement is a remedy requiring a wrongdoer to return the
benefits wrongfully received from another. Claims for disgorgement
are viewed as uninsurable both as a matter of common law or public
policy and because the specific language in D&O policies
typically excludes coverage for losses resulting from the
acquisition of an improper benefit.
