Tag Archives: Advancement

Protecting Corporate Executives’ Rights to Advancement and Indemnification

Most senior corporate executive have a general understanding of the importance to them of their corporate indemnification rights. As discussed here, a related but sometimes even more important corporate benefit is the right to advancement – that is, the right to have their defense fees paid on a contemporaneous basis while legal proceedings against them … Continue Reading

Who is an “Officer”? A Critical Inquiry for Indemnification and Insurance

Many companies provide advancement, indemnification and insurance benefits and protection for their officers and directors. However, it is not always clear who is an “officer” for purposes of claiming the benefits and protection. The long-running and high-profile saga of Sergey Aleynikov, the former Goldman Sachs computer programmer and company Vice President accused of stealing proprietary … Continue Reading

Bankruptcy Court: D&O Insurance Available for MF Global Executives’ Defense, Without Restriction

On September 4, 2014, in the latest in a series of rulings on the issue of whether MF Global’s D&O insurers may pay the defense expenses the company’s former officers and directors are incurring in the various lawsuits pending against them, Southern District of New York Bankruptcy Judge Martin Glenn held that the insurers may … Continue Reading

Bankruptcy Court Lifts Stay to Allow D&O Insurer to Pay Individuals’ Defense Expenses

As those involved in D&O Insurance claims well know, a recurring D&O insurance problem is the question of whether or not the D&O insurer for a bankrupt company can pay the costs of the bankrupt company’s former directors and officers incurred in defending claims against them. Disputes arise when the individuals seek to have the … Continue Reading

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

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

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

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

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”?

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

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

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

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

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

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

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