Regular readers of this blog know that I have been following the developing SPAC-related litigation closely. Readers also know that the cast of defendants in these cases can be extensive, diverse, and in some cases overlapping. For example, the defendants may include former directors and officers of the SPAC; former directors and officers of the acquired company; and current directors and officers of the company formed by the merger. Some of the individuals named may be sued in more than one capacity. These features of the suits will complicate the litigation. These features will also complicate the application of insurance to the defense and settlement of this litigation, as well.

In an April 27, 2021 post on the Freshfields law firm blog entitled “Tower vs. Tower: Implications of SPAC Shareholder Litigation for the D&O Insurance World” (here), Freshfields partner Boris Feldman takes a look at these complications and “what a wave of SPAC shareholder suits may mean for the Directors and Officers Liability Insurance Industry.”
Continue Reading Will SPAC-Related Securities Suits Lead to “Tower vs. Tower” D&O Insurance Coverage Battles?

The Second Circuit recently took up the insurance coverage dispute arising out of the high profile enforcement action the SEC pursued against hedge fund Patriarch Partners and its CEO, Lynn Tilton. The district court had ruled that coverage under the firm’s third level excess D&O insurance policy for the expenses the firm incurred in defending the SEC action was precluded because the agency’s investigation preceded the policy’s “prior and pending” litigation date. The Second Circuit affirmed the district court, but not on the grounds on which the lower court had relied. Rather, the appellate court affirmed the district court ruling based on its conclusion that coverage was precluded under language in the warranty statement the firm submitted for the excess insurance policy. The opinion includes interesting discussion of the issues surrounding the warranty statement. The Second Circuit’s December 6, 2018 Summary Order in the case can be found here.
Continue Reading Second Circuit: Excess D&O Policy’s Warranty Statement Exclusion Precludes Coverage

Ninth CircuitRegular readers know that one of my hobby-horse issues is what I perceive as insurers’ overbroad application of the professional services exclusion typically found in private company D&O insurance policies, particularly with respect to policyholders in services businesses. Because of this long-standing concern, I was interested to see that a policyholders’ rights group has filed an amicus brief in the Ninth Circuit in support of a policyholder’s appeal of a district court ruling that coverage under a D&O insurance policy for the underlying claim was precluded by the professional services exclusion. While the amicus brief may help focus the appellate court on the problems involved in what is a recurring situation, the larger point may be that as an industry we need to address a problem that affects all industry participants.
Continue Reading Policyholder Group Supports Appeal Involving Professional Services Exclusion

michigan1Many issues become complicated in the bankruptcy context. That is certainly true of D&O insurance coverage issues. A recent coverage decision out of the Western District of Michigan illustrates this point. In a March 31, 2016 opinion (here), Judge Janet Neff, applying Michigan law, held that the relevant D&O insurance policies’ Insured vs. Insured exclusion precluded coverage for a claim that was first transferred by a bankrupt company to a Liquidation Trust and then asserted by the Liquidation Trust against the company’s former directors and officers.
Continue Reading Insured vs. Insured Exclusion Bars Coverage for Liquidation Trust’s Claim Against Bankrupt Firm’s Execs

dcOn May 15, 2014, in an interesting decision illustrating how complex insurance contract wordings can interact to produce outcomes policyholders may not have expected or intended, District of Columbia Superior Court Judge Frederick H. Weisberg held that as worded a broad professional services exclusion in The Carlyle Group’s management liability insurance policy precluded coverage for

An insured’s guilty plea to criminal charges relieved his professional liability insurer of its duty under the policy to defend him against related civil claims, according to a June 18, 2013 Order by Southern District of Florida Judge Daniel Hurley. Judge Hurley’s decision is interesting because it addresses the question whether the court can consider