A frequent and frustrating issue for policyholders under Directors & Officers (“D&O”) insurance is whether exclusions bar coverage due to prior litigation or other related allegations made against the insured in the past. In the recent decision of Emmis Communications Corp. v. Illinois National Insurance Co., an Indiana federal court found that it was not enough for the insurer to rely on mere factual allegations in common with a prior lawsuit against its insured to deny coverage. The court recognized that, if mere factual overlap were sufficient, coverage for virtually any subsequent lawsuit would be precluded. Instead, the insurer must show that the subsequent claims allege facts that form the basis of the causes of action in the prior lawsuits in order to prove interrelatedness and preclude coverage. Although the decision is extremely fact-specific, it underscores the complex nature of D&O insurance claims and the outer-limits of interrelated wrongful act exclusions.
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