Wyoming Case Highlights Shortcoming of D&O Policies

Directors and Officers (“D&O”) policies provide valuable coverage for a wide range of claims. For a more detailed review of their many benefits, see my previous blog here: https://lnkd.in/ghr_DJQD. That said, a recent case highlighted one of the largest cracks in D&O coverage. In Tri Cnty. Tel. Ass'n, Inc. v. Twin City Fire Ins. Co., No. 24-CV-274-R, 2026 U.S. Dist. LEXIS 10410, at *30 (D. Wyo. Jan. 12, 2026), the court determined that the insurer had no duty to defend based on the policy’s “Insured vs. Insured” exclusion. Some form of this exclusion is present in virtually all D&O policies. In Tri Cnty., the underlying suit was a class action brought against the insured by its former board member. His role qualified him as a “Manager” under the policy terms, making him an “Insured” and triggering the exclusion. Neither of the policy’s exceptions to the exclusion were triggered.  

D&O policies must be supplemented with others that can fill in their gaps. For example, a typical Commercial General Liability (“CGL”) policy has no "Insured vs. Insured" exclusion. Insurers try to prevent the scenario of funding both sides by limiting who qualifies as an “Insured.” Aram Logistics v. United States Liab. Ins. Co., No. 3:23-cv-01869-H-DEB, 2024 U.S. Dist. LEXIS 17951 (S.D. Cal. Jan. 31, 2024), aff'd on other grounds, 2025 LX 229411 (9th Cir. Feb. 12, 2025), is instructive. There, two former employees of a logistics company (Diakon) were accused of various wrongful acts related to their founding of a competing logistics company (Aram) while still employed by Diakon.  

If these former employees were tasked to make pitches to clients while still employed by Diakon, they might have used their access they secured through being Diakon employees to promote business for their new company as the preferred logistics company to service the clients of Diakon. That activity could potentially have been covered by their then-employer’s policy. That conduct might implicitly disparage or defame Diakon (even while they were still its employees) and trigger “advertising injury” coverage for disparagement or defamation.  

Aram shows one of many reasons why counsel should carefully evaluate the policies for both sides of a dispute. Depending on the coverage available to an opposing party, it may be beneficial to amend the pleadings to facilitate an insurer-funded settlement. It will also allow plaintiffs and their counsel to properly account for the possibility of pursuing a policy as a judgment-creditor after a ruling is secured. Retaining expert coverage counsel can aid in this analysis, which is often the most critical aspect of a dispute if the defendant lacks the funds to satisfy a judgment.