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In the wake of the 2019 merger of Viacom and CBS that formed ViacomCBS (later renamed Paramount Global), former shareholders of both CBS and Viacom filed separate D&O liability lawsuits. As discussed here, the CBS shareholders’ lawsuit settled $165.5 million. The separate Viacom shareholders’ lawsuit settled for $122.5 million, and now the battle has shifted to insurance coverage litigation in which the Viacom’s excess insurers contend that coverage for the settlement is precluded by the primary policy’s Bump-Up Provision.

In an interesting August 10, 2023, opinion, Delaware Superior Court Judge Sheldon K. Rennie, applying Delaware law, granted Viacom’s motion for partial summary judgment, holding that the Bump-Up Provision does not preclude coverage for the settlement. As discussed below, Judge Rennie’s holding turned on the nature of the transaction in which Viacom and CBS merged, and, even more significantly, on the contrast between the wording of the Bump-Up Provision, on the one hand, and other policy provisions dealing with merger situations, on the other hand. A copy of Judge Rennie’s opinion can be found here.…

Continue Reading Bump-Up Provision Does Not Bar Viacom Shareholders’ Suit Settlement Coverage

Umesh Pratapa

Many of us have personal checklists that we use when we review D&O insurance policies. In the following guest post, Umesh Pratapa, an independent insurance consultant based in India, shares his checklist of items to look for in D&O insurance policies. Because Umesh works in the Indian insurance market, some of the items may be less relevant in other markets. I appreciate Umesh’s willingness to share his checklist with the readers of this site. By publishing Umesh’s checklist, I hope to encourage others also to share their checklists to post on this site for other readers to benefit from. Umesh published a prior version of this article on his website, here. I would like to thank Umesh for allowing me to publish his article on this site. Here is Umesh’s article.…

Continue Reading Guest Post: D&O Liability Insurance Policy – Assumed Vs. Available Coverage

Many management liability exclusions contain contractual liability exclusions to clarify that the policy doesn’t provide coverage for contractual breach claims. However, as I have pointed out in prior posts, insurers, in reliance on the exclusion’s broad wording, often seek to apply these exclusions broadly, to apply to a wide variety of kinds of claims beyond contractual liability disputes. In a recent Fifth Circuit decision, the appellate court rejected an insurer’s attempt to apply a contractual liability exclusion to preclude coverage for an underlying breach of fiduciary duty claim. The reasoning of the Fifth Circuit in rejecting the insurer’s arguments provide policyholders with common sense reasoning on which to rely in seeking to avoid the application of the exclusion to noncontractual claims.…

Continue Reading Contractual Liability Exclusion Does Not Bar Coverage for Fiduciary Duty Claim

Sarah Abrams

A host of economic factors — including most significantly the Fed’s interest rate increases (as part of The Fed’s overall money tightening policy sometimes referred to as Quantitative Tightening (QT)) – are putting pressure on companies, and the pressure is translating into increasing bankruptcy filings. In the following guest post, Sarah Abrams, Head of Professional Liability Claims at Bowhead Specialty, takes a look at these developments and considers the D&O insurance implications. I would like to thank Sarah for allowing me to publish her article as a guest post on my 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 Sarah’s article.…

Continue Reading Guest Post: Is QT making D&O Policies a Liquid Asset? 

It is frequently the case that my posts on this site occasion so little commentary that I often wonder whether anyone is reading them at all. Every now and then, though, one of my posts seems to stir things up a little bit. That was clearly the case with respect to a recent post in which I commented about the bump-up exclusion – the post has provoked quite a bit of conversation. In light of subsequent discussions I have had about the post, it appears that I should revisit some of the issues discussed in the post. For starters, I have revised parts of the prior post to take into account some of the observations about the post that have been made to me. In addition, I also note the following.…

Continue Reading More Thoughts About the Bump Up Exclusion

In yet another Delaware court D&O insurance coverage decision that is sure to set the D&O insurance industry spinning, a Delaware Superior Court Judge has held that a SPAC’s post-merger runoff policy provides coverage for the defense fees of former directors of the pre-Merger target company for alleged Wrongful Acts that the occurred prior to the merger – even though the former directors were not directors or officers of the SPAC at the time they allegedly committed the alleged Wrongful Acts. The court’s ruling could even further complicate the already fraught process of placing and structuring D&O insurance in the De-SPAC context. A copy of the Court’s February 6, 2023 opinion can be found here. (Please note that I have linked to the copy of the opinion on the Court’s website; the website copy to which I linked says that the opinion was filed under seal, but the seal reportedly was lifted by the court on February 16, 2023.)…

Continue Reading Delaware Court: Pre-Merger Target Company Execs Are Insured Persons Under SPAC’S Post-Merger Tail Policy

For the second time in recent days, a court has held that a D&O insurance policy provision operates to preclude coverage for claims against an insured company and its executives that the consideration to be paid for the acquisition of the insured company is inadequate. The Seventh Circuit in a recent decision held that the “inadequate consideration” exclusion (sometimes referred to as the “bump-up” exclusion) in the applicable D&O insurance precludes coverage for a claim that disclosure in the company’s proxy statement omitted information that could have been used to negotiate a higher price. As discussed below, the policy wording at issue was relevant to the outcome. The Seventh Circuit’s January 23, 2023, opinion in the Komatsu Mining Corp. case can be found here.…

Continue Reading “Inadequate Consideration” Exclusion Precludes Coverage for Underpayment of Insured Company’s Acquisition

Among the various provisions of the D&O insurance policy, one of the most litigated provisions is the Insured vs. Insured exclusion, which, in simple terms, precludes coverage for claims brought by one insured against another insured. However, the exclusion typically has several carve-back provisions preserving coverage for various kinds of claims that otherwise would be excluded. One of these carve-back provisions came into play in a court’s recent determination, applying Kentucky law, that coverage for a claim brought by a group of plaintiffs that included both insured and non-insured persons was precluded, because the claim had not been brought independently of the participation of an insured person.

A copy of Southern District of New York Judge Valerie Caproni’s December 9, 2022, opinion in the case can be found here. A January 18, 2023 post on the Wiley law firm’s Executive Summary blog about the decision can be found here.…

Continue Reading Coverage Precluded Where Claims Brought by Both Insured and Non-Insured Persons

It is a standard D&O insurance policy feature that if two claims are “related” within the meaning of the policy then they are “deemed” a single claim first made at the time of the earlier claim. However, in a recent coverage dispute, a Delaware court held, in reliance on policy language the court found to be clear and unambiguous, that two related claims were deemed first made not at the time the earlier claim but rather during the policy period of the policy in force at the time the later claim was made. Confused? Read on!…

Continue Reading Two Claims Related But Deemed Made During the Later Claim’s Policy Period

One of the hotly contested issues in recent years has been whether or not there is D&O insurance coverage for shareholder appraisal actions. In a recent decision that was largely focused on choice of law issues, the Delaware Supreme Court affirmed the trial court’s dismissal of a policyholder’s action to try to obtain coverage for defense costs incurred in an underlying shareholder appraisal action. Though the insurers prevailed in this coverage dispute, the Court’s holding on the choice of law issues could have ominous implications for insurers’ prospects in future coverage disputes, as discussed below. The Delaware Supreme Court’s January 10, 2023, opinion in the Stillwater Mining Company coverage dispute can be found here.…

Continue Reading Delaware Supreme Court: No Coverage for Appraisal Action