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: fraud exclusion

D&O Insurance: Guilty Pleas Trigger Coverage Exclusions, Entitle Insurer to Recoupment

Posted in D & O Insurance
In a detailed April 23, 2014 opinion (here), Eastern District of Virginia Judge Liam O’Grady, applying Virginia law, held that the guilty pleas of executives of Protection Strategies, Inc. triggered four separate exclusions in the D&O coverage section of PSI’s management liability policy and that the management liability insurer was entitled to recoup the defense fees … Continue Reading

The SEC’s New Policy Requiring Admissions of Wrongdoing: What Are the Implications?

Posted in Securities Litigation
On August 19, 2013, in connection with its entry into a settlement with New York-based hedge fund adviser Phillip Falcone and his advisory firm Harbinger Capital Partners, the SEC for the first time implemented its new policy requiring defendants seeking to settle civil enforcement actions to provide admissions of wrongdoing, in contrast to the long-standing … 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: When Can Individuals’ Fraudulent Misconduct be Imputed to the Insured Entity?

Posted in D & O Insurance
The typical D&O insurance policy precludes coverage for loss arising from fraudulent misconduct. But when an insured has been convicted of fraud, whose coverage is precluded? In the second case in recent days to address the consequences for the insured entity of the criminal conviction of one of the entity’s principals, Judge James L. Graham … Continue Reading

D&O Insurance: Coverage for SafeNet Options Backdating Securities Suit Settlement Denied

Posted in D & O Insurance, Options Backdating
The options backdating scandal may now be ancient history, but questions surrounding insurance coverage for the scandal’s consequences apparently continue to live on. In a September 9, 2011 opinion applying Maryland law, Southern District of New York Judge Naomi Reice Buchwald ruled in a coverage action brought by SafeNet’s excess D&O insurer that, among many … Continue Reading

D&O Insurance: Does “Fraudulent” Mean “Fraudulent”?

Posted in D & O Insurance
If a verdict form contains the jury’s specific finding that the insured engaged in “fraudulent, malicious, oppressive, wanton, willful, or reckless conduct,” you might think that would trigger the exclusion for fraudulent misconduct in the applicable D&O insurance policy. But apparently not, at least according to a May 12, 2011 Southern District of West Virginia ruling … Continue Reading

D&O Insurance: The Adjudicated Fraud Exclusion

Posted in D & O Insurance
In a June 25, 2008 decision (here), the Delaware Superior Court (New Castle County) refused to apply a D&O policy adjudicated fraud exclusion to preclude coverage for the settlement, defense fees and costs incurred in connection with an underlying securities lawsuit.   The coverage action arose out of the AT&T Corporation Securities Litigation, the background … Continue Reading