When allegations of fraud against directors and officers are rampant, a principal benefit of insurance coverage is the assurance that an insurer will indemnify directors and officers if their corporation cannot or will not. Yet sometimes insurers refuse to provide this indemnification by blaming the directors and officers — a response that often should provoke skepticism.

Increasingly, insurers are balking at providing coverage for directors and officers (D&O policies) in certain circumstances that insurers label “restitution” or “disgorgement.” This typically occurs when the insurer believes that the directors or officers are being sued to require the return of money that they should not have had in the first place. Insurers argue, for example, that one cannot steal money from another person and then be covered by insurance for returning the money to its rightful owner.

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