Underwriters should take care to define professional services in directors’ and officers’ (D&O) policies, HWL Ebsworth Lawyers partner Tim Griffiths warns.

Such a step gives clarity on which occupational activities are included or excluded, he told the Australian Professional Indemnity Group’s annual conference last week.

“If you’re going to include a definition, it’s important that you look at actual operations of the insured company and that means, of course, getting that information from the broker.”

Mr Griffiths says if exclusions are unspecified or policy language is ambiguous, insurers should expect courts to interpret policies against them.

Any professional indemnity (PI) cover should also be examined, he says.

Limits and deductibles should be examined, and if limits are unfavourable the D&O policy could become a “stopgap PI policy”.

Brokers should avoid situations where covers overlap or contain gaps.

Different underwriters may have drafted policies for the same insured under differing management risk, D&O and PI policies, Mr Griffiths says.

“There is that terrible risk of an overlap in cover, which is not good because that means you can have a double insurance dispute and you can have considerable delays in sorting that out. But worse still, of course, is if you have a gap in cover.”

He says judges use a “judicial telescope”, through which the scope of exclusion clauses is narrower than that of inclusion clauses.