Law360, New York ( March 21, 2017, 10:41 AM EDT) -- Most directors and officers insurance policies have conduct exclusions precluding coverage for fraudulent, criminal or willful misconduct. However, mere allegations are insufficient to trigger this exclusion. If allegations alone were enough, then many claims that would otherwise be covered under the policy would be precluded from coverage, because many D&O claims involve allegations of fraudulent, criminal or willful misconduct. These days, the conduct exclusions in most D&O policies require a judicial determination in order for the exclusion's preclusive effect to be triggered. Exactly what constitutes a sufficient judicial determination is a matter of policy wording. A recent California intermediate appellate court considered a policy that required a "final adjudication" in order for the exclusion to be triggered and determined that the exclusion did not apply to preclude coverage while the insured person's appeal remained pending, despite the insured person's criminal securities fraud conviction. The opinion provides an interesting insight into the operation of a conduct exclusion with wording of the type found these days in many D&O insurance policies....