Major Shareholder Exclusion (D&O)

The Major Shareholder Exclusion removes cover for claims made by, or on behalf of, a shareholder with a large stake in the company's voting shares. The exact threshold varies between insurers, though 10% to 15% is a common range. This exclusion exists because major shareholders often sit on the board or hold strong sway over company decisions, which can create a moral hazard. A major shareholder could otherwise sue the directors and collect a payout from the D&O policy. The exclusion also guards against collusive or staged claims made just to draw on the insurance. Most policies still keep cover in place for some situations. These include a derivative action brought with proper leave of the court, a claim by a shareholder who held their stake before the alleged wrongful act, employment claims by shareholder-employees, and whistleblower actions. In Australian closely-held companies, this exclusion needs close review, since founding shareholders often keep a large stake while still serving as directors.

The Major Shareholder Exclusion removes cover for claims made by, or on behalf of, a shareholder with a large stake in the company's voting shares. The exact threshold varies between insurers, though 10% to 15% is a common range. This exclusion exists because major shareholders often sit on the board or hold strong sway over company decisions, which can create a moral hazard. A major shareholder could otherwise sue the directors and collect a payout from the D&O policy. The exclusion also guards against collusive or staged claims made just to draw on the insurance. Most policies still keep cover in place for some situations. These include a derivative action brought with proper leave of the court, a claim by a shareholder who held their stake before the alleged wrongful act, employment claims by shareholder-employees, and whistleblower actions. In Australian closely-held companies, this exclusion needs close review, since founding shareholders often keep a large stake while still serving as directors.