The Impact of COVID-19 on D&O Coverage

The insurance industry is continuing to experience an increase in D&O-related claims and lawsuits due to the pandemic. A more prevalent issue involves accusations that a company’s executive management or directors and officers allegedly contributed to the drop in stock price or other negative financial consequences triggered by COVID-19-related issues.

As these lawsuits become more widespread, it is advised that you closely examine the specific language of your D&O policy in conjunction with state laws to determine whether claims are indeed within the scope of coverage. At the same time, you should review your policy for possible exclusions that could create additional challenges.

Possible Policy Exclusions 
According to an earlier report by Willis Towers Watson (WTW), the structure and coverage of D&O liability insurance policies is being put to the test, with the following possible exclusions coming into play and creating challenges for some companies. 

  • Bodily Injury. The first type of bodily injury (BI) exclusion in a D&O policy provides first-dollar coverage in the form of defense costs and settlements, and excludes losses for BI, sickness and disease. These are considered direct losses. Today, questions surrounding whether a D&O policy will provide BI coverage for COVID-19-related claims, and whether policy exclusions will include the action/inaction of executives and board of directors, are being closely examined. Currently, for COVID-19-related claims seeking damages for indirect financial losses, the BI exclusion doesn’t appear to be a coverage issue.
  • Pollution. Depending on the case and the language of a particular policy, pollution exclusions could become the basis for denials for policies with claims in connection with COVID-19. For example, if a company’s executives are alleged to have engaged in improper waste disposal practices “arising out of” the actual discharge of pollutants. Exceptions may be available for Side A losses and securities claims.
  • Conduct. In COVID-19-related conduct claims, the exclusion for fraudulent or dishonest acts may trigger a non-appealable ruling of such conduct and should be a point of consideration. As to whether the insured is alleged to have engaged in intentional/negligent conduct will be based on an in-depth assessment.
  • Errors and Omissions (E&O). Policies with an E&O exclusion are likely to exclude losses “for” or “based upon, arising out of” acts or omissions in the delivery or failure to deliver professional services. According to WTW, the “based upon” wording may have the biggest impact in COVID-19 cases for companies in affected industries, such as healthcare and life sciences. Once again, exceptions for Side A losses and securities claims may be available.

It’s important to note that COVID-19-related claims triggered under a D&O policy can also impact additional lines of coverage such as general liability and environmental. Because the specifics of each claim and policy language will differ, how a policy responds will be based on the individual case.

Despite the challenges brought about by COVID-19, the broad coverage that a D&O liability policy provides continues to be a proactive way in which to mitigate risks. If you haven’t already done so, now is the time to consult with your insurance professional and review your policy.

To learn how D&O insurance can help protect your business, contact the experts at Oakwood D&O. We have over 15 years of experience specializing in all aspects of management liability, with an ardent focus on directors and officers.

Get in touch – email Eli Solomon, CEO, at or call (323) 686-7519.

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