Originally published in Insurance Law360 on May 24, 2012.

Many liability insurance policies — including directors and officers (D&O), errors and omissions (E&O) and professional liability policies — contain exclusions that bar coverage for claims “based on or attributable to an insured gaining in fact a personal profit or advantage to which the insured is not legally entitled.”

The purpose of these so-called personal profit or illegal profit exclusions is to prevent an insured from reaping a windfall by receiving insurance coverage for ill-gotten gains that the insured profited from and is forced to disgorge.