Directors and Officers (D&O) liability insurance policies typically contain standard conduct exclusions that bar coverage for loss arising out of a deliberately fraudulent or deliberately criminal act or omission or willful violation of law as well as loss arising out of the gaining of any profit to which an insured was not legally entitled. Over the last couple of decades, these conduct exclusions have been narrowed for the benefit of the insureds in a number of ways.

To avoid penalizing innocent insured persons for the bad conduct of other insured persons, conduct exclusions in many policies have been modified by non-imputation language intended to limit the application of the exclusion to the bad actor and the insured entity.