D&O, Management and Professional LiabilityMission Statement 2023-2024 Co-Chairs Selected Presentations & Papers: Posted 10/27/2023 Posted 10/25/2023 Posted 10/25/2023: Posted 10/2023 Posted 10/16/2023 Posted 10/16/2023 Posted 9/27/2023
Posted 8/14/2023
1st Circuit Affirms Late Notice Coverage Denial in the Harvard Case
Board Oversight Duties: Recent Adventures in the Delaware Chancery Court
Southern District of New York Holds D&O Insurer Liable for $4.5 million in Arbitration Costs
Nevada Enacts Statute Prohibiting Burning Limits Policies Posted 6/23/2023 The Fifth Circuit rejects an insurer’s attempt to apply a contractual liability exclusion to preclude coverage for an underlying breach of fiduciary duty claim. Read more.
FTX Proceedings Highlight D&O Issues Amid Bankruptcy
SC Fed Court Rules in Favor of Insurer, Allowing Them To Recoup Defense Costs in Attorney E&O Claim The Court granted summary judgment in favor of the insurer in the declaratory judgment action, finding that the insured had prior knowledge of the potential claim before the inception of the policy. The insurer argued that the insured should have provided notice of a potential claim as soon as the insured became aware of the statute of limitations issue or when the lawsuit was dismissed with prejudice. Read more.
S.C. Law Firm Must Reimburse Insurer for Defense Costs An insurer can recoup more than $188,000 from a law firm that it defended in an underlying legal malpractice suit, a South Carolina federal court ruled, nearly a month after finding the carrier had no duty to defend or indemnify the firm. Read more.
Texas Appellate Court Reverses Judgment For Insurer and Remands Dispute Regarding Extent of Coverage Under a Crime Policy
When Does a Claim Become a “Claim”? A Lesson on Timely Notice The Southern District of New York denied a policyholder’s claim for coverage in Pine Management, Inc. v. Colony Insurance Company based on a letter delivered to the insured two weeks before the policy incepting constituting a claim. Read more.
Policyholder Perspective: Advantages of Delaware Law for Litigating D&O Coverage Disputes
Delaware Court: Pre-Merger Target Company Execs Are Insured Persons Under SPAC’S Post-Merger Tail Policy A Delaware Superior Court Judge has held that a SPAC’s post-merger runoff policy provides coverage for the defense fees of former directors of the pre-Merger target company for alleged Wrongful Acts that the occurred prior to the merger – even though the former directors were not directors or officers of the SPAC at the time they allegedly committed the alleged Wrongful Acts. Read more.
Viacom's Insurers Must Face Coverage Suits Over CBS Merger A Delaware state judge ruled that several of Viacom's directors and officers insurance carriers must face the media company's suits seeking coverage for litigation stemming from its merger with CBS, deeming the dispute ripe for consideration. Read more.
Fifth Circuit Affirms Judgment in Favor of Insured Under a Funds Transfer Fraud Endorsement of a Crime Protection Insurance Policy This case involves a denial of coverage for a claim due to a fraudulent routing number supplied to the insured escrow agent. Following a denial of the insured’s proof of loss on the basis that the loss was not covered by the funds transfer fraud endorsement in the insured’s crime protection insurance policy, the insured filed suit after and won a ruling on coverage in the district court. On appeal, the Fifth Circuit affirmed holding that the only interpretation of Clause A of the policy that does not render Clause B meaningless is that coverage is triggered under the funds transfer fraud endorsement for a loss caused by a written instruction being forged or altered by someone other than the insured without the insured’s knowledge or consent prior to being issued by the insured. Read more.
This decision came after McDonald’s shareholders sued the company’s former head of human resources, alleging that the officer breached his duty of oversight by “allowing a corporate culture to develop that condoned sexual harassment and misconduct.” Read more.
For the second time in recent days, a court has held that a D&O insurance policy provision operates to preclude coverage for claims against an insured company and its executives that the consideration to be paid for the acquisition of the insured company is inadequate. The Seventh Circuit in a recent decision held that the “inadequate consideration” exclusion (sometimes referred to as the “bump-up” exclusion) in the applicable D&O insurance precludes coverage for a claim that disclosure in the company’s proxy statement omitted information that could have been used to negotiate a higher price. As is often the case, the specific policy language was key to the decision. Read more.
Insured Fails to Provide Timely Notice of Claim and Prior Knowledge Exclusion Bars Coverage in Subsequent Policy
New York Federal Court Applies Kentucky Law and Denies Coverage Based on Insured vs Insured Exclusion The United States District Court for the Southern District of New York, applying Kentucky law, has held that an insured v. insured exclusion bars coverage for a lawsuit brought by both insured and non-insured security holders as well as a non-security-holder, non-insured entity. The court found that an exception to the exclusion did not apply because an insured provided substantial assistance in bringing the case against the company’s directors and officers. Gregory v. Navigators Ins. Co., No. 2022 WL 17551995 (S.D.N.Y. Dec. 9, 2022). Read more.
Two Claims Related But Deemed Made During the Later Claim’s Policy Period A Delaware court holds, in reliance on policy language the court found to be clear and unambiguous, that two related claims were deemed first made not at the time the earlier claim but rather during the policy period of the policy in force at the time the later claim was made. Read more.
Bump Up Exclusion Bars Coverage for Insured Company’s Acquisition Underpayment A California court interpreted an unusually worded bump up exclusion that arguably applied to preclude coverage whether or not the insured company was the acquiror or the acquisition target, the court held that the exclusion unambiguously precluded coverage for the settlement of a claim that the directors of Onyx Pharmaceuticals, the insured company, had breached their duties by accepting an inadequate amount for the sale of their company. Read more.
Execs Covered For Sears Bankruptcy Claims, Del. Judge Says Two excess directors and officers insurers must defend a real estate investment trust and its executives from underlying bankruptcy litigation accusing them of siphoning billions of dollars from Sears, a Delaware Superior Court judge said in a decision unsealed this month. The Court held that the insureds sufficiently demonstrated an alternative claim for coverage for an adversary proceeding as a "non-securities claim" and found that coverage can't be denied because the proceeding is related to a previous action. Read more.
Delaware Supreme Court Sides With Insurers In $20M D&O Dispute over Appraisal Costs The Delaware Supreme Court upheld a ruling that a mining company doesn't have insurance coverage for its $20 million-plus legal bill stemming from a 2017 stockholder appraisal lawsuit, rejecting the company's argument that Montana law should apply to the dispute. A three-justice Delaware high court panel said in an opinion Thursday that the insured can't rely on Montana's coverage by estoppel remedy to argue that insurers must cover the company's defense costs for appraisal litigation under directors and officers policies. Read more.
Insurer Fights Law Firm's Bid For Malpractice Case Coverage Based on Failure to Disclose Claim An insurance company has told a Tennessee federal court it shouldn't have to honor the $1 million liability policy it sold to a law firm because when the firm president renewed the policy, he didn't disclose that a malpractice claim could be coming. Read more.
D&O Diary’s 10 Ten D&O Stories of 2022
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