The D&O Diary

The D&O Diary

A PERIODIC JOURNAL CONTAINING ITEMS OF INTEREST FROM THE WORLD OF DIRECTORS & OFFICERS LIABILITY, WITH OCCASIONAL COMMENTARY

Tag Archives: Advancement

First Circuit: D&O Insurer Must Advance Failed Bank Directors and Officers’ Defense Expenses

Posted in D & O Insurance
In an interesting March 31, 2014 opinion (here), the Unites States Court of Appeals for the First Circuit, applying Puerto Rico law, affirmed a district court’s ruling that the D&O insurer for the failed Westernbank of Mayaguez, Puerto Rico must advance the bank’s former directors’ and officers’ expenses incurred in defending the FDIC’s suit against … Continue Reading

Goldman Sachs Must Advance Criminal Defense Fees of Former Employee Accused of Stealing Computer Code from the Company

Posted in Director and Officer Liability
In an October 22, 2013 opinion (here) that underscores the important distinction between indemnification and advancement and that highlights the sometimes surprising extent to which corporate officials are entitled to advancement of their attorneys’ fees when claims are filed against them, District of New Jersey Judge Kevin McNulty held that Goldman Sachs must advance the … Continue Reading

More Thoughts About Corporate Officials’ Defense Cost Advancement Rights

Posted in Director and Officer Liability
An important accessory to the indemnification rights of directors and officers is their right to have their defense expenses advanced while the claims against them are pending, before their ultimate right to indemnification has been determined.  A frequently recurring issue is the question of when the company may withhold advancement. This issue often arises when … Continue Reading

D&O Insurance: Fourth Circuit Affirms That Convicted Exec Must Repay Insurer for Defense Expenses

Posted in D & O Insurance
Lee Farkas, the criminally convicted former Chairman and majority shareholder of  the defunct Taylor Bean and Whitaker Mortgage Corporation, must repay the nearly $1 million in defense fees the company’s D&O insurer had advanced on his behalf, according to an April 11, 2013 Fourth Circuit opinion. The terse three-page appellate opinion adopts the ruling of the … Continue Reading

D&O Insurance: So What is a “Securities Claim”?

Posted in D & O Insurance
The modern public company D&O insurance policy provides coverage not only for the directors and officers of the company but also for the company itself – however, in the public company D&O insurance policy, the entity coverage applies only to securities claims, a limitation that sometimes leads to disputes whether or not a particular matter … Continue Reading

Thinking About the Limits of Corporate Officials’ Defense Cost Advancement Rights

Posted in Corporate Governance
In addition to indemnification, corporate directors and officers also may have the right under applicable law and corporate by-laws to have their costs of defense advanced before the ultimate right to indemnification has been determined. A question that often arises is whether a corporation may withhold advancement. A recent decision from the Ontario Superior Court … Continue Reading

ABA Business Law Section’s Corporate Counsel Checklist for Executive Protection

Posted in D & O Insurance
In the August 2012 issue of Business Law Today, the ABA Business Law Section published an article entitled “Training for Tomorrow: Corporate Counsel Checklist for Supervising Creation/Renewal of D&O Protection Program” (here). The article describes the critical components of a comprehensive executive protection program. A detailed description of the article and an explanation of the … Continue Reading

Director Protection: Advancement and Indemnification

Posted in Corporate Governance
One of the most important sources of director protection is corporate  indemnification. But as significant as indemnification is for the protection of directors, the directors’ first line of defense, literally, is their right to advancement of their costs of defense. All too often, these two terms – advancement and indemnification – are used interchangeably, but … Continue Reading

Eleventh Circuit: HealthSouth Settlement Appropriately Eliminated Scrushy’s Indemnification Rights

Posted in Securities Litigation
In a June 17, 2009 opinion (here), the Eleventh Circuit upheld the district court’s entry, in connection with the $445 million partial settlement of the HealthSouth securities action, of a bar order that extinguished Richard Scrushy’s contractual claims both for indemnification of any settlement he may enter in the case as well as for advancement … Continue Reading

D&O Insurance: Defense Expense Advancement

Posted in D & O Insurance
On June 26, 2008, Judge Gerard Lynch of the Southern District of New York issued another opinion (here) in the D&O insurance coverage litigation arising out of the Refco debacle (My recent post discussing Judge Lynch’s prior opinion in the case discussing insurance application issues can be found here.)   In yet another judicial decision that … Continue Reading

Former Directors, Advancement Rights, and D&O Insurance

Posted in Corporate Governance, D & O Insurance
It is generally understood that under Delaware law, directors enjoy broad rights of indemnification and advancement. The Delaware statutory regime does allow corporations a great deal of flexibility in how they adapt these provisions to their own circumstances. But while these principles are generally understood, it may nevertheless come as a surprise to many that … Continue Reading