Coverage Quelled by Extreme Exhaustion Arguments

This article originally appeared in Anderson Kill's Policyholder Advisor (November/December 2013).

Companies that have purchased towers of excess directors and officers insurance take warning: Washington is the latest state to hold that settling a claim with your primary D&O insurance company may negate excess coverage on grounds that the primary policy was not “exhausted.”

The case, Quellos Group LLC v. Federal Insurance Company et al., should prompt directors and officers to ask: Has our broker made sure that our tower of D&O insurance is as seamless as claimed—and proof against extreme “exhaustion” arguments?