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📋 '''Insured vs. insured exclusion''' is a [[Definition:Policy exclusion | policy provision]] found most commonly in [[Definition:Directors and officers liability insurance (D&O) | directors and officers (D&O) liability insurance]] that bars coverage when one [[Definition:Insured | insured]] party brings a [[Definition:Claim | claim]] against another insured under the same policy. The exclusion exists to prevent collusive or intra-corporate litigation from being funded by the [[Definition:Insurance carrier | insurer]] — for example, a company suing its own directors to recover losses in a manner that effectively converts the [[Definition:Insurance policy | policy]] into a business-loss recovery tool rather than a genuine [[Definition:Liability insurance | liability]] protection.

⚙️ In a typical D&O policy, the insured vs. insured exclusion applies when the company itself, or a person qualifying as an insured under the policy, initiates suit against another insured. Variations exist in how broadly the exclusion is drafted: some forms include carve-backs for [[Definition:Shareholder derivative action | shareholder derivative suits]], [[Definition:Whistleblower | whistleblower]] actions, [[Definition:Bankruptcy | bankruptcy]] trustee claims, or employment-related proceedings, recognizing that not all intra-insured disputes are collusive. [[Definition:Insurance broker | Brokers]] negotiate these carve-backs carefully during [[Definition:Policy placement | placement]], because the scope of the exclusion can determine whether a multi-million-dollar [[Definition:Securities litigation | securities claim]] brought by a bankruptcy estate or a board committee is covered. [[Definition:Underwriting | Underwriters]] evaluate the governance quality and litigation history of the applicant when calibrating how narrow or broad the exclusion should be.

💡 Getting the insured vs. insured exclusion wrong can leave a boardroom exposed at precisely the moment coverage is most needed. Post-acquisition disputes, internal investigations that morph into litigation, and regulatory-driven clawback actions can all trigger the exclusion if the policy wording has not been tailored to the insured's specific risk profile. The exclusion also surfaces in [[Definition:Employment practices liability insurance (EPLI) | employment practices liability]] and certain [[Definition:Professional liability insurance | professional liability]] forms, though its significance is most acute in the D&O context. Experienced [[Definition:Risk manager | risk managers]] treat the negotiation of insured-vs.-insured carve-backs as one of the highest-priority elements in any [[Definition:Management liability | management liability]] program.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Directors and officers liability insurance (D&O)]]
* [[Definition:Policy exclusion]]
* [[Definition:Shareholder derivative action]]
* [[Definition:Side A coverage]]
* [[Definition:Employment practices liability insurance (EPLI)]]
* [[Definition:Management liability]]
{{Div col end}}

Definition:Insured vs. insured exclusion - Revision history

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