All posts by Tab Turano

Insurance Policy Review 101 (Part 3)

Today’s blog post is the third video in a series by Miller Friel attorney Tab Turano discussing the kind of insurance policy reviews that are routinely conducted corporate policyholders.  This video continues with the need for a yearly audit of claims and potential claims as part of the insurance renewal process.  This video focuses on the so-called “notice-of-circumstances” clause contained in standard D&O policies.  This provision affords companies the ability to provide notice of events, circumstances or other potential wrongful acts that, although not currently the subject of any legal proceedings, may later lead to the filing of a lawsuit against the company.  The video highlights, by way of example, the benefit of reporting such potential future claims to D&O insurers prior to policy expiration, and the practical significance of such actions, including the ability to preserve the limits of liability of current D&O policies.

Please watch the video to learn more, or Contact us if you have any questions.

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Insurance Policy Review 101 (Part 2)

Today’s blog post by Miller Friel attorney Tab Turano highlights the need for companies to conduct a yearly audit of claims and potential claims as part of the insurance renewal process.  This video explains the importance of timely notice of claims under so-called “claims-made” insurance policies, such as directors and officers policies, errors and omissions policies, and professional liability policies.  While the failure to provide timely notice of a claim may be fatal to insurance coverage, in many circumstances, the need to provide such notice may not be obvious, as highlighted in the video by way of example.  It is imperative that companies focus on notice as a regular part of the process of renewing insurance coverage.  Often times, consultation is with coverage counsel is an important step in this process.

Please watch the video to learn more, or Contact us if you have any questions.

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Insurance Policy Review 101 (Part 1)

In today’s blog post, Miller Friel Attorney Tab Turano discusses the basics of insurance policy review for corporate directors and officers (“D&O”) D&O insurance programs.  Companies purchase D&O insurance to protect against a wide-array of liabilities, from securities lawsuits to governmental investigations.  Often times, corporate policyholders accept either off-the-shelf policies offered by insurance carriers, or pre-approved insurance broker enhancements.  These form policies and broker enhancements are seldom state-of-the-art, and can always be improved.  Unless the language is truly boilerplate in nature, Insurance companies are open to negotiation.  The best language maximizes insurance coverage, rather than minimizes it, but this kind of language is not what is offered.  For this reason, many corporations retain insurance coverage lawyers at the underwriting stage to provide a second look at proposed coverage.  Counsel can combine their knowledge of both the insurance market and insurance law to craft enhancements to standard policy terms, and broker-suggested enhancements, which can, in some cases, do more harm than good.

Please watch the video to learn more, or Contact us if you have any questions.

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The Supplementary Payments Provision (Part 2)



Today’s blog post is the second video in a two-part series by Miller Friel attorney Tab Turano discussing the importance of the supplementary payments provision in general liability policies.  This clause is designed to cover a number of ancillary liabilities faced by companies that are dragged into litigation and forced to go to trial, including awards of plaintiffs’ attorneys’ fees, interest awarded by the court, and the costs associated with appeal bonds.  The video highlights, by way of example, how policyholders may rely upon the supplementary payments clause to collect far more than policy limits of liability – often times, ten, twenty, or more times the policy’s limit of liability.  Also addressed are insurers’ recent attempts to curtail this all-important coverage.

Please watch the video to learn more, or Contact us if you have any questions.

To see the first half of this video, visit: The Supplementary Payments Provision, Part 1.


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The Supplementary Payments Provision (Part 1)



An often-overlooked provision in General Liability Insurance Policies is the Supplementary Payments provision.  This clause, tucked away in the back of the policy, provides some of the most valuable coverage available in standard general liability policies.  In particular, the provision provides coverage for, among other things, attorneys’ fees awarded to opposing counsel in litigation and pre-judgment interest.  And, notably, coverage under the provision is in addition to, and not limited by, the policy’s limits of liability.

This video blog post is the first video in a two-part series by Miller Friel attorney Tab Turano discussing the importance of the supplementary payments provision.  It demonstrates, by way of powerful example, the value of the supplementary payments provision, and how corporate policyholders can take advantage of the coverage it affords. Please watch the video to learn more, or Contact us if you have any questions.


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Steps to Maximize D&O Coverage for Investigations – Part 3



This video is the third of a three-part series addressing issues companies should focus on when negotiating and purchasing D&O insurance to adequately protect against governmental investigations. In this post, Miller Friel Attorney Tab Turano continues his discussion on maximizing insurance recovery for governmental investigations. Both public and private companies face the threat of governmental investigations. These investigations by Federal agencies, from the SEC to the FCC to the DOJ, can be for violations of securities laws, the Foreign Corrupt Practices Act, and other laws and regulations. Having the right D&O insurance can be critical for defending such proceedings. Not all D&O policies, however, are the same. This video discusses the importance of negotiating a broad and favorable “allocation clause” as well as narrowly-tailored “conduct exclusions,” both of which are important for maximizing defense coverage in connection with governmental investigations.

Please watch the video to learn more, or Contact us if you have any questions.

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Steps to Maximize D&O Coverage for Investigations – Part 2



Today’s blog post is the second video in a three-part series addressing steps that policyholders should take to maximize insurance recovery for governmental investigations under D&O insurance policies.  Public and private companies are frequently the subject of governmental investigations.  Defense of these proceedings is expensive.  It is not atypical for defense costs to exceed $10 million for a typical investigation, with larger investigations costing hundreds of millions of dollars.

There are a number of steps that policyholders take to maximize insurance recovery for governmental investigations.  Because defense of governmental investigations is typically front end loaded, the issue of when defense coverage is triggered is a critical.  If coverage is triggered when a lawsuit is filed, coverage may be useless in a situation where a claim is settled prior to the filing of a formal lawsuit.  Coverage under a D&O policy should be triggered prior to the government’s issuance of a Wells Notice, target letter or other formal order of investigation.  Policy language to this effect allows for recovery defense costs incurred responding to voluntary information requests and other events that typically occur early on in the government’s inquiry.  Likewise, a well-negotiated D&O policy should cover investigations even where the company is not the primary target of the government’s inquiry.

These and other issues are explored further in Part 2 of the video series.  Please watch the video to learn more, or Contact us if you have any questions. Continue reading

Steps to Maximize D&O Coverage for Investigations – 1) Secure Defense Coverage For Pre-Formal Investigation Costs and Expenses



In today’s blog post, Miller Friel Attorney Tab Turano discusses how to maximize insurance recovery for governmental investigations.  Public companies these days face the threat of a multitude of investigations by Federal agencies, from the SEC to the FCC to the DOJ, for violations of securities laws, Foreign Corrupt Practices Act and other laws and regulations.  Defense of these proceedings can cost tens of millions of dollars.  Having the right insurance coverage is critical.  Not all D&O policies, however, are the same.

This video is the first of a three-part series addressing issues companies should focus on in negotiating and purchasing Directors and Officers insurance, with an eye towards maximizing coverage for investigations.  Part one addresses the importance of securing coverage for costs incurred prior to an actual formal governmental investigation.   Please watch the video to learn more, and contact us if you have any questions.  Continue reading

Restitution or Disgorgement of Ill-Gotten Gains Is Insurable

Ill Gotten GainsCoverage for restitution, or disgorgement of so-called “ill-gotten gain,” is perhaps the most prevalent issue in the world of directors and officers (D&O) insurance, today.  Years back, the Seventh Circuit Court of Appeals attempted to limit the scope of insurance coverage by declaring that “loss” within the meaning of an insurance policy does not include restoration of ill-gotten gain.  Level 3 Communications v. Federal Ins. Co., 272 F. 3d 908 (7th Cir. 2001).  The court reasoned that insurance policies should not “insure a thief against the cost to him of disgorging the proceeds of the theft.” Id. at 910.  In the years following Level 3, courts expanded this notion, proffering that restitutionary loss in uninsurable as a matter of law or public policy, even in instances where a policyholder acted negligently or otherwise in the absence of culpability.  Insurers, emboldened by the judicial support, began to routinely deny claims, simply taking as a truism the notion that any relief label “restitution” or “disgorgement” must be uninsurable as a matter of course.

Restitution or Disgorgement of Ill-Gotten Gains Is Insurable

Policyholders, for good reason, fought back; and numerous courts have chipped away at the misguided assumption that “restitution” or disgorgement is not, and cannot ever be, covered by insurance.  For instance, in J.P. Morgan Securities Inc. v. Vigilant Ins. Co., 992 N.E.2d 1076, 1082 (N.Y. 2013), the Court of Appeals of New York rejected an insurer’s argument that an SEC order requiring “disgorgement” of profits was uninsurable.  Rather, the court looked beyond the government’s label, and held that an insurer must demonstrate that the relief at issue actually represents the return of illicit profits retained by the insured to be insurable.  Id.  Likewise, in Burks v. XL Specialty Ins. Co., 2015 WL 6949610 (Tex. App. Nov. 10, 2015), the court rejected the insurer’s argument that settlement of a claim seeking restitution was uninsurable as a matter of law in the absence of an express finding that the settlement amount, in fact, represented the return of ill-gotten gain. Id. at *9. The same conclusion was reached by the court in U.S. Bank Nat’l Assoc. v. Indian Harbor Ins. Co., 68 f. Sup. 3d 1044, 1050 (D. Minn. 2014).  Going further, the Arizona court, in Cohen v. Lovitt & Touche, Inc., 308 P.3d 1196, 1200 (Ariz. Ct. App. 2013), flat rejected the notion that state public policy law prohibits insurance coverage for restitutionary payments.  And, finally, last month, a Delaware state court rendered yet another decision on the issue of insurability of restitutionary payments furthering bolstering corporate policyholders’ claims for coverage.  See TIAA-CREF, et al v. Illinois Nat’l Ins. Co., et al., Case No. N14C-05-178 JRJ CCLD (Del. Sup. Ct.) (“TIAA-CREF”).

The TIAA-CREF Decision

The underlying lawsuit at issue in TIAA-CREF involved clams by participants in the defendant’s investment services that TIAA-CREF failed to pay participants certain “TFE gains” between the order date and the processing date in connection with withdrawal or transfer requests.  Ultimately, the claims were settled, with express denial of liability provisions.  TIAA-CREF sought insurance coverage for the settlement, but its insurers denied the claim, arguing, among other things, that the settlement payments were uninsurable as disgorgement of ill-gotten gain under New York law.  The court, however, disagreed.  The court dug deeper into the issue than prior courts to examine the actual nature of disgorgement.  It noted that disgorgement is defined as “the act of giving up something (such as profits illegally obtained) on demand or by legal compulsion,” and that the New York Courts have elaborated that the purpose of disgorgement “is to deprive a party of ill-gotten gains and to deter improper conduct.”

Based on this, the court determined that the relief at issue in TIAA-CREF was not uninsurable, pointing to two factors.  First, the TIAA-CREF lawsuit was settled after lengthy litigation and with an express denial of liability by TIAA-CREF.  Second, neither the SEC nor any other governmental agency was involved in the underlying action.  The court reasoned that a settlement in private litigation – particularly a settlement absent any finding of liability –is different than a governmental order to return funds, particularly where there is no conclusive link between an insured’s alleged misconduct and the payment of money.  At bottom, the court determined there simply was basis to conclude that TIAA-CREF had acted wrongfully, or that the settlement payment at issue triggered the public policy concerns behind the notion of disgorgement.  According to the court, the settlement, therefore, was covered by insurance.


The issue of insurability of restitutionary settlement payments arises in many contexts, from securities litigation to governmental investigations to whistleblower actions and more.  All too often, insurers deny these claims as a matter of course using  dated and improper judicial reasoning as support.  This approach supports the insurance industries overall belief that it is proper to sell policies covering these kinds of damages, but when a claim is presented, if is equally proper to deny coverage.  Restitution or disgorgement damages, as a general rule, are covered by insurance.  But, it took some time for the tide to turn.  Corporate policyholders have been successfully tearing down the “wall of uninsurability” brick-by-brick, and successful challenges to the so-called restitution and disgorgement defense are now the norm.  As a result, companies  no longer need to accept improper coverage denials based on this outdated defense.

7 Tips for Fighting Back Against the D&O Personal Profit Exclusion

Cash May be King, But It Is Not Necessarily Profit

Cash May be King, But It Is Not Necessarily Profit

Few provisions in Directors and Officers (“D&O”) insurance policies have given rise to more litigation than the personal profit exclusion.  For those unfamiliar, the provision generally excludes coverage for claims arising from or based upon the gaining of any personal profit, advantage or remuneration to which an insured was not legally entitled.  Insurers typically allege that this exclusion applies broadly to D&O lawsuits that allege an act of wrongdoing leading, directly or incidentally, to the company receiving some profit or advantage.  Compounding the issue, the personal profit exclusion, unlike other conduct-related exclusions (e.g., the “fraud exclusion”), does not require culpability or ill-motive.  According to insurers’ thinking, the clause excludes coverage for virtually all D&O lawsuits. Indeed, the potential reach of the personal profit exclusion seems bound only by the imaginations of creative insurers seeking to deny coverage.

Judicial Application of the Exclusion

Not surprisingly, given the amorphous language of the personal profit exclusion and its potentially broad application, the provision has given rise to substantial litigation in recent years.  Some courts have been quick to apply the clause to all sorts of claims involving nearly any type of benefit allegedly obtained by an insured.  Other courts have recognized that this exclusion, if applied too broadly, could swallow up the very protections intended under D&O policies.

Alstrin v. Saint Paul Mercury Insurance Company, 179 F. Supp. 2d 376 (D. Del. 2002), is the seminal case espousing a constrained view of the personal profit exclusion.  Alstrin involved coverage for an underlying securities class action lawsuit alleging fraud and misrepresentations in the issuance of company stock.  The court recognized that nearly all securities fraud complaints will allege “that the defendants did what they did in order to benefit themselves in some way.”  Id. at 400.  If mere allegations of profit or benefit were sufficient to implicate the personal profit exclusion, D&O coverage for securities claims would be rendered valueless. Id.  Therefore, according to the court, the personal profit exclusion applies only “[i]f an element of the [underlying] cause of action . . . requires that the insured gained a profit or advantage to which he was not legally entitled.” Id.  It does not apply to illegal acts that produce profit or gain to the insured as a by-product. In other words, the clause would apply to “cases of theft, such as insider trading,” but not to securities lawsuits, where “the only illegalities alleged are false and misleading disclosures in violation of the federal securities law.” Id.  Any profit or gain in such case is simply incidental to the proscribed conduct — the illegal misrepresentations — and does not trigger the exclusion. Id.

Numerous courts have adopted the Alstrin approach to the personal profit exclusion.  See, e.g., In re McCook Metals, LLC, 2007 WL 1687262 (N.D. Ill. 2007) (holding that personal profit exclusion was inapplicable to breach of fiduciary duty claims, since an illegal profit was not an element of the underlying cause of action); Peerless Ins. Co. v. Pennsylvania Cyber Charter School, 19 F. Supp. 3d. 635 (W.D. Pa. 2014) (recognizing that exclusion applies only where underlying complaint alleges that insureds gained an illegal profit or advantage).

In contrast to Alstrin’s circumscribed approach, other courts have applied the personal profit exclusion more broadly.  In Jarvis Christian College v. National Union Fire Ins. Co., 197 F.3d 742 (5th Cir. 2000), for example, the court declared that “the term ‘advantage’ is broader than the term ‘profit,’” and that “[t]he former does not mean a balance-sheet profit; rather, it encompasses any gain or benefit, such as an opportunity to make a profit.” Id. at 748-49; see also TIG Specialty Ins. Co. v., Inc., 375 F.3d 365, 372 (5th Cir. 2004) (relying upon the personal profit exclusion to deny coverage to innocent officers and directors and holding that “coverage is excluded for all insureds, not merely the Insured who profited”).  Jarvis and Pinkmonkey are often cited by insurers seeking to deny coverage.

Actionable Strategies

The uncertainty that currently exists regarding judicial interpretation of the personal profit exclusion is unlikely to be resolved any time soon. There are, however, certain measures that companies can take in the meantime to lessen the risk that the provision is invoked to preclude coverage for a claim. Companies can, and should, work with their insurance brokers and coverage counsel to negotiate favorable policy language during the underwriting process. The following policy enhancements should be vigorously pursued:


The policy should clearly limit the personal profit exclusion’s potential applicability solely to those insureds who have actually received an illegal profit.  Coverage for “innocent insureds” should be preserved through inclusion of a clear non-imputation clause.  The policy should provide within the personal profit exclusion, for example, that “[n]o Wrongful Acts shall be imputed to any person for the purpose of determining the applicability of the [exclusion].”


The “personal profit” exclusion was never intended to be applied to corporations, as corporations do not earn “personal profits.”  Accordingly, the personal profit exclusion should expressly provide that the exclusion does not apply to the insured organization or company.  Alternatively, if this cannot be achieved, the exclusion should provide that only the conduct of certain individuals, such as the company’s CEO, COO or CFO, shall be imputed to the company.


Language should be inserted in the clause clarifying that the exclusion is triggered only if a final, non-appealable, adjudication adverse to the insured in the underlying action establishes such profit.  This language prevents the insurer from denying coverage based upon the exclusion unless the insured’s improper profit or remuneration is established through litigation.  Thus, the exclusion is inapplicable if a company settles a claim or a lawsuit. Moreover, by requiring a final, non-appealable, adjudication, the insurer cannot deny coverage based solely on allegations in a lawsuit against the insureds, or even on an unfavorable jury verdict.  Finally, by requiring that the adjudication take place in the underlying action, the insurer may not attempt to prove an insured’s wrongdoing in an insurance coverage lawsuit after the fact.


It should be very clear in the D&O policy that the insurer is obligated to pay all of the insured’s defense costs incurred in connection with the claim or lawsuit until such time that there is a final, non-appealable adjudication against the insured.  Such language guarantees that the directors’ and officers’ defense will be fully funded unless and until they are actually adjudged to have violated the law.  It also prevents insurers from attempting to recoup any previously advanced attorneys’ fees and costs where the personal profit exclusion is ultimately triggered — a growing practice among D&O insurers.


Most D&O policies exclude coverage for claims arising out of any personal profit, remuneration or advantage to which the insured was not legally entitled.  The notion of “advantage” should be deleted from the exclusion.  The term is simply too amorphous. One need look no further than the court’s decision in Jarvis to see how broadly courts may apply the exclusion based on this term.  There must be practical bounds to the scope of the exclusion and deletion of the term “advantage” will help to establish a workable and fair limitation on potential insurer abuse of the exclusion.


The exclusion should apply only to claims “based upon or directly resulting from” the gaining of an illegal personal profit.  Wording such as “relating to” or “in any way involving” should be avoided. Deleting such language may limit the temptation of insurers to apply the exclusion too broadly.


In the event a claim is filed against the company that may potentially trigger the exclusion, coverage counsel should be timely consulted.  An early understanding of the potential scope and impact of the personal profit exclusion based on the allegations against the insured may impact defense strategy in the underlying litigation.  Moreover, compromise or settlement of claims, such as securities lawsuits, should be crafted with the potential impact of the exclusion in mind.  Often times, a careful understanding of the scope of the personal profit exclusion can preserve insurance coverage and transfer the risk of loss from a company and its officers and directors to the insurer, where it belongs.


The personal profit exclusion is too often relied upon by insurers seeking to deny coverage for D&O claims.  Insurers contend that the reach of the personal profit exclusion extends to virtually all claims, ranging from standard securities lawsuits to breach of fiduciary duty claims.  Carriers also contend that the exclusion impacts the availability of insurance coverage for both organizations and their individual officers and directors.

The best defense against the exclusion is a good offense.  In particular, the potential scope of the provision can and should be limited up front during underwriting.  Coverage counsel can assist in proposing appropriate language, and can work alongside brokers to negotiate favorable policy terms.

Even if policy changes are not made and an insurer raises the profit exclusion to deny coverage for a particular claim, this should not prove fatal to coverage.  Favorable judicial decisions exist, and policyholders should not accept a denial of coverage based on the personal profit exclusion without a fight.  Appropriate informal advocacy by coverage counsel may be sufficient to defeat an insurance carrier’s position and obtain the insurance protection to which a policyholder is entitled.  And, in the event that insurance coverage litigation proves necessary, given the favorable state of the law in this area, it is unlikely that an insurer will ultimately prevail.

Miller Friel, PLLC is a specialized insurance coverage law firm whose sole purpose is to help corporate clients maximize their insurance coverage. Our Focus of exclusively representing policyholders, combined with our extensive Experience in the area of insurance law, leads to greater efficiency, lower costs and better Results. Further discussion and analysis of insurance coverage issues impacting policyholders can be found in our Miller Friel Insurance Coverage Blog and our 7 Tips for Maximizing Coverage series. For additional information about this post, please email or call Tab Turano (, 202-760-3163).