[10870]
April 6, 1999
TO: DIRECTOR SERVICES COMMITTEE No. 13-99
RE: INSURANCE COVERAGE FOR INDEPENDENT DIRECTORS IN SUITS
BROUGHT BY MANAGEMENT
______________________________________________________________________________
ICI Mutual Insurance Company recently revised its liability insurance policy to address concerns
expressed by SEC Chairman Arthur Levitt with the “insured vs. insured” exclusion commonly found in
directors and officers/errors and omissions (D&O/E&O) liability insurance. The exclusion addresses
situations in which one party sues another covered by the same insurance policy and was put in place
originally to avoid collusive activity. However, exceptions to the exclusion did not address situations in
which a fund adviser sues the fund’s independent directors. The revision to the insurance policy allows
fund directors to recover for defense costs, settlements and judgments in bona fide “insured vs. insured”
claims otherwise covered under the policies.
A copy of the ICI Mutual press release announcing the revised policy is attached to this
memorandum.
Marguerite C. Bateman
Associate Counsel
Attachment