Public company D&O insurance policies restrict “entity coverage” (that is, coverage for claims directly against the corporate entity, as opposed to those against individual directors and officers) to “Securities Claims.” If a claim against the company is not Securities Claim then there is no coverage for the company’s defense fees, settlements, and judgments. This obviously creates a huge incentive for the companies to try to show that the claims against them are Securities Claims – which, in turn, has spawned a great deal of coverage litigation addressing the question whether or not a particular corporate lawsuit is or not a Securities Claim.

In the latest example of these kinds of coverage disputes, last week the District of Maryland, applying Maryland law, held that an antitrust claim filed against a corporate entity was not a securities claim within the meaning of the applicable policy – not because the antitrust claim was not “Securities Claims,” but rather because the dispute did not involve alleged transactions in the securities of the company or its subsidiaries. The Maryland court’s March 24, 2026, opinion can be found here.

Background

Supernus Pharmaceuticals is a pharmaceutical company based in Maryland. In 2020, as a way to acquire the rights to distribute Apopkyn, a prescription medication for the treatment of Parkinson’s disease, Supernus acquired USWM Enterprises (“Enterprises”).

In 2022, Sage Chemical and TruPharma, two competitors of Supernus, sued Supernus, alleging that Supernus’s acquisition of Enterprises, and specifically its acquisition of the rights to distribute Apokyn, violated the antitrust laws, and that Supernus otherwise engaged in uncompetitive behavior.

Supernus submitted the antitrust lawsuit to its D&O insurer as a claim under its policy. The insurer denied coverage for the claim, on the grounds that the underlying action is not a “Securities Claim” within the meaning of the policy.

Supernus sued the insurer, seeking a declaratory judgment that the insurer improperly denied coverage for the claim, and alleging that the insurer breached its contract and the implied covenant of good faith and fair dealing. The insurer filed a motion to dismiss the coverage lawsuit.

Relevant Policy Terms

The policy defines the term “Securities Claim” as “any claim … which in whole or in part is: …  2. based upon, arising out of or attributable to the purchase or sale of, or offer to purchase or sell, any securities issued by the Company….”

The policy defines “Company” to be Supernus and its “Subsidiaries.” The term “Subsidiaries” is defined as (1) “any organization in which” Supernus (or one of its subsidiaries) owns “more than 50% of the outstanding voting securities representing the present right to vote” for directors or managers; (2) “any organization in which one or more Companies, in any combination”  have the right to elect a majority of directors or managers; or (3) “charitable foundations or trusts controlled by a Company.”

The March 24, 2026, Opinion

On March 24, 2026, District of Maryland Judge Adam B. Abelson, applying Maryland law, granted the insurer’s motion to dismiss on the ground that the underlying action does not trigger the Securities Claim coverage.

In finding that the underlying action was not a Securities Claim, Judge Abelson noted that the acquisition in dispute in the underlying action was a cash transaction and did not involve “securities issued by the Company.” To the extent the acquisition involved any securities, the securities were issued by Enterprises prior to its acquisition by Supernus, not by Supernus or by Enterprises at a time when Enterprises was a subsidiary of Supernus. The relevant policy provisions, Judge Abelson said, “are plain and unambiguous” – “because the claims in the Underlying Action do not arise from securities issue by the Company, Supernus is not entitled to Securities Claim coverage.”

Supernus had tried to argue that it nevertheless was entitled to coverage because Enterprises was a subsidiary of Supernus by the time the insurance claim was made. Judge Ableson rejected this argument, saying that “accepting all of Supernus’s allegations as true there is no reasonable way to conceive of [the underlying] claims as arising out of securities ‘issued by the company.’” The relevant question is not whether Enterprises was a subsidiary at the time the underlying claim was made; the relevant question, the court said, “is whether Enterprises was a subsidiary of Supernus when it issued securities.” It was not, the court said, and so “under the plain language of the policy,” the underlying claims do not give rise to coverage.

The court did briefly acknowledge the question whether or not the fact that the underlying action was an antitrust claim rather and a claim for violation of the securities laws should or should not bar coverage. Judge Abelson did not address this issue on the merits, noting simply that the insurer did not deny coverage because the underlying antitrust action was not a Securities Claim. Rather, the insurer based its coverage denial on the fact that the underlying action did not arise out of the issuance of securities by Supernus or its subsidiaries, so, the court found, it did not need to address whether the underlying claims arose out of alleged antitrust law violations rather than claims alleging violations of the securities laws.

Discussion

The starting point for any analysis of this decision – as indeed for any insurance coverage related decision – is the policy language at issue. Here, the relevant portion of the definition of Securities Claim specifically referenced the purchase or sale, or offer to purchase or sell, and securities “issued by the Company,” with the definition of Company including any company Subsidiaries. The “issued by the Company” language was, in the end, outcome determinative here, as the court concluded that the underlying acquisition did not involve any securities issued by the company.

I emphasize this point that the phrase “issued by the Company” was critical to the outcome because it is not found in all public company D&O insurance policies’ definitions of the term “Securities Claim.” Or, to put it another way, the specific policy wording matters. I make this point because it is absolutely indispensable in reviewing the many court decision interpreting the meaning of the term “Securities Claim” to focus on the specific policy language at issue in any particular case. In many of the cases, the specific policy language at issue explains the outcome in any particular case, which can make it difficult to differentiate among the various coverage case decisions.

I will say this, it is interesting to me that the court felt it did not need to reach the issue whether or not the underlying antitrust claim came within the meaning of the phrase “Securities Claim.” The court felt it did not need to reach this issue because it was not the basis of the insurer’s coverage denial.

Though the court did not reach the issue, the question whether or not the underlying antitrust claim could fairly be characterized as a Securiteis Claim within the meaning of the policy presents an interesting question. It is worth noting that while the the court not reach the issue, it did quote authority on which Supernus sought to rely to the effect that “courts interpreting materially identical definitions of ‘Securities Claim’ have consistently confirmed that coverage does not require an express allegation of a securities law violation.”

Certainly, in prior cases, other policyholder have tried to argue that a wide variety of other kinds of disputes can be brought within the definition of the term “Securities Claim.”

Disputes of this kind, seeking an expansive definition of the term securities claim, have required courts to find, for example, that a bankruptcy trustee’s fraudulent transfer claim is not a Securities Claim, as discussed here. Indeed, the Delaware Supreme Court has in fact twice been called in to rule that a fraudulent transfer claim is not a Securities Claim, both times in cases involving bankrupt companies that had previously spun out of Verizon, as discussed here.  The Delaware Supreme Court has also separately held that an appraisal action is not a “Securities Claim,” as discussed here.

Other court have held that a tolling agreement is a “Claim” but not a “Securities claim,” as discussed here; that a breach of fiduciary duty claim is not a “Securities Claim, as discussed here; and that a formal SEC investigation is not a “Securities Claim,” as discussed here.

In a separate proceeding the Ninth Circuit held that the claims against a mortgage originator and securitizer involving the company’s issuance of mortgage-backed securities were not  “Securities Claims” on ground similar to those involved here, in that the mortgage backed securities the company issued as part of its ongoing business were not securities “of the Company” within the meaning of the policy.

These cases arise because of the incentives the public company D&O policy creates. Because the entity coverage is limited to “Securities Claim,” companies have an incentive to try to argue that they claims that have been filed against them are, in fact, Securities Claims. Indeed, there undoubtedly will be another case another day involving allegations that underlying antitrust claims come within the policy’s definition of the term “Securities Claim.” When that day comes, it will worth remembering that even though the court here granted the insurer’s motion to dismiss, the court did not hold that the antitrust claims asserted here were not Securities Claims.