In the following guest, Yaminah Williams, Assistant Vice President, Hiscox USA, Alicia Garcia, Claims Counsel, Hiscox USA, Katherine Hausmann, Senior Complex Claims Specialist, Hiscox USA, Elan Kandel, Member, Bailey Cavalieri LLC and James Talbert, Associate, Bailey Cavalieri LLC, review the key 2001 D&O insurance coverage decisions. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
Continue Reading Guest Post: The Year in Review: 2021 Key D&O Insurance Coverage Decisions

In  a prior post in which I discussed the “basic value proposition” of D&O insurance, I noted that among the five indispensable elements required in order for coverage under a D&O insurance policy to exist is the requirement that the individual seeking coverage must have been acting in an Insured Capacity. The prerequisite that the Insured Person must have been acting in an Insured Capacity at the time of the alleged Wrongful Act arises from the fact that individuals act in a number of different capacities; it is only conduct undertaken in their capacity as an officer or director of the insured company for which the insurance policy provides coverage.

A July 3, 2021 decision by Southern District of New York Judge Gregory H. Woods, applying New York law, provides a good illustration of how individuals may be acting in multiple capacities, and underscores the fact that while the insurance under a D&O policy is only available when the insured is acting in his or her capacity as a director or officer of the insured company, coverage is not entirely precluded if the individual is acting in dual or multiple capacities. A copy of the Judge Woods’s opinion can be found here.
Continue Reading Individuals Acting in Multiple Capacities Entitled to Defense for Acts Undertaken in Insured Capacity

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?

Commercial enterprises sometimes are organized in complex structures consisting of multiple, legally separate legal entities. The legal separation between the various entities can be significant in a variety of ways. One particular context within which these separate legal identities can be very important is in the D&O insurance context, as the insurance may be structured to apply to specified entities (and therefore not to others).

In the D&O insurance context, the availability of coverage for individual directors or officers may depend on the entity within the structure on whose behalf the individuals were acting – that is, the coverage question will depend on the “capacity” in which the individuals were acting. A recent decision by the New York (New York County) Supreme Court Commercial Division highlights the importance of these capacity issues and underscores that the capacity in which an individual was acting can be coverage determinative. The court’s February 2, 2021 opinion can be found here.
Continue Reading D&O Insurance Coverage Barred for Execs Not Acting in an Insured Capacity

As readers know, directors and officers of both public and private companies face a number of sources of potential liability exposure that can in turn learn to claims against them. One area of potential D&O claims exposure that may not always be considered is the possibility that the individuals could face claims brought against them by their own company, as happened, for example, in the lawsuit that McDonald’s recently filed against its former CEO. The latest example of a case where a company has sued one of its former senior officials is the lawsuit filed earlier last week by General Motors against one of its former directors, based on allegations that the director leaked confidential information to a rival company and to the UAW, which, the company alleges, added billions to the company’s labor costs. The lawsuit, which is interesting in and of itself, also raises a number of interesting issues, as discussed below. A copy of GM’s complaint in the lawsuit can be found here.
Continue Reading GM Files Lawsuit Against One of Its Own Former Directors

In an interesting decision that touches on a number of basic D&O insurance coverage issues, a federal district court judge applying Oklahoma law has ruled that a company’s management liability insurance policy does not provide coverage for legal expenses a former company executive incurred in a declaratory judgment action that had been filed by another company executive to determine the parties’ rights under a profit sharing agreement. The court concluded that there was no coverage because the individual seeking coverage had not been named as a defendant in the lawsuit by reason of his status as an insured person. Even more interestingly, the court concluded further that, even though the individual had been named as a defendant in the declaratory judgment lawsuit, he had not incurred “Defense Expenses” in the lawsuit, and therefore suffered no “Loss.” Western District of Oklahoma Judge David Russell’s June 30, 2020 redacted opinion in the insurance coverage action can be found here.
Continue Reading No Coverage for Legal Expenses Incurred in Declaratory Judgment Action

In the following guest post, Alison Finn, Claims Counsel, DWF Claims; Elan Kandel, Member, Bailey Cavalieri; and James Talbert, Associate, Bailey Cavalieri, take a look at the most important management and professional liability coverage decisions for 2019, involving the perennial coverage issues for insurers and policyholders. I would like to thank Alison, Elan, and James for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
Continue Reading Guest Post: Key 2019 Management and Professional Liability Insurance Coverage Decisions

One of the basic requirements in order for coverage to be triggered under a directors’ and officers’ liability insurance policy is that the misconduct alleged must have been undertaken by insured individuals in an “insured capacity” – that is, in their capacities as directors or officers of the insured entity. In a recent insurance coverage ruling, the Delaware Superior Court held that because the allegations against the insured individuals “arose out of” their involvement with entities other than the insured entity, there was no coverage for the individuals under their bankrupt company’s D&O insurance policy. The ruling underscores the importance of capacity issues in determining D&O insurance coverage and highlights the ways in which allegations of misconduct undertaken in multiple capacities can lead to complicated coverage questions. The Delaware Superior Court’s November 30, 2018 decision can be found here.
Continue Reading D&O Insurance: No Coverage for Alleged Misconduct Not Undertaken in an Insured Capacity

One of the key elements to establish coverage under a directors and officers insurance policy is the existence of claim is for actions undertaken by an insured individual in an insured capacity – that is, in his or her capacity as a director or officer of the company. Things in life are never simple, and lawsuits often allege that corporate director or officer defendants were acting in multiple capacities – that is, both in their capacity as a director or officer and in other capacities as well. These multiple capacity claims often present policy interpretation and coverage issues under D&O insurance policies.

In a recent case, the District Court of North Dakota (applying North Dakota law) held that coverage under a D&O insurance policy does not apply to a claim alleging that the insured defendant was acting in multiple capacities. The court also held that the Insured vs. Insured exclusion precluded coverage where the claimants included both insured persons and individuals that were not insured persons. The decision raises some interesting policy language and policy interpretation issues. A copy of May 18, 2018 decision by District of Massachusetts Judge William G. Young, sitting by designation in the District of Nevada, can be found here.
Continue Reading D&O Insurance: Coverage Precluded for Insured Director Acting in Multiple Capacities

The insurance available under a D&O insurance policy does not protect insured individuals for all of their activities; rather, the policy protects the individuals only for their actions undertaken in their capacities as officer or directors of the insured organization. The policy does not protect the individuals for actions undertaken in their personal capacity or for actions undertaken as a result of their involvement with entities other than the insured organization.

A recent decision out of the District of North Dakota and applying North Dakota law illustrates the coverage-determinative importance of the question of capacity. In an October 3, 2017 opinion (here), District of North Dakota Judge Daniel Hovland held that because the allegations against the individual who was seeking coverage did not involve alleged actions undertaken in an insured capacity, the individual was not entitled to coverage under the policy. The ruling underscores the importance of capacity issues and also highlights how challenging these issues can sometimes be when individuals are acting in multiple capacities.     
Continue Reading D&O Insurance and Insured Capacity