D & O Insurance

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Paul Ferrillo

In a recent guest post, industry veterans John McCarrick and Paul Schiavone outlined some policy terms and conditions they suggested D&O insurers may want to address as the insurers try to re-orient toward profitability. In the following guest post, Paul Ferrillo provides his response to John and Paul’s article. Paul is a shareholder in the Greenberg Traurig law firm’s Cybersecurity, Privacy, and Crisis Management Practice. I would like to thank Paul for allowing me to publish his guest post as an article 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 Paul’s article.

Continue Reading Guest Post: Scope of Coverage is Fine – Rate and Claim-Paying are the Keys

John McCarrick
Paul Schiavone

In the following guest post, John McCarrick and Paul Schiavone propose that as D&O insurers seek to return to profitability by raising prices, the insurers should also revisit many of the coverage extensions that have become standard in recent years. The authors present a “wish list” of specific items they suggest insurers might want to consider; the list itself is the result of the authors’ “anonymous survey” of insurer-side professionals. My commentary on the authors’ proposals follows below. John is a partner in the law firm White and Williams LLP and leads the Firm’s Financial Lines Practice Group.  Paul is a Senior Vice President at Allianz, and is the Global Head of Alternative Risk Transfer and North American Head of Corporate Long Tail Lines.  I would like to thank John and Paul for allowing me to publish their article 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 John and Paul’s article.
Continue Reading Guest Post: Is it Time to Revisit the Scope of D&O Coverage?

Most public company D&O insurance policies provide coverage for the corporate entity only for “Securities Claims.” But what constitutes a “Securities Claim”? That is the question the Delaware Supreme Court addressed in a recent appeal of an insurance coverage dispute in which a bankruptcy trustee had sued Verizon for breach of fiduciary duty, unlawful payment of a dividend, and violation of the uniform fraudulent transfer act. The trial court had entered summary judgment for Verizon, ruling that the bankruptcy trustee’s claims represented “Securities Claims” within the meaning of the policy. In an October 31, 2019 decision (here), the Delaware Supreme Court reversed the lower court, ruling that the bankruptcy trustee’s claims were not Securities Claims within the meaning of the policy. As discussed below, the decision raises some interesting issues.
Continue Reading Delaware Supreme Court: What is a “Securities Claim”?

D&O insurance policies sometimes contain Major Shareholder Exclusions, precluding coverage for claims brought by shareholders’ with ownership percentages above a certain specified ownership threshold. But when is the shareholder’s ownership percentage to be determined – at the time of policy inception or at the time of the claim? This issue was among the D&O insurance coverage question presented in a recent case before the Third Circuit. The appellate court, applying Delaware law, found that the exclusionary language involved was ambiguous, and therefore resolved the issue in the policyholder’s assignee’s favor. As discussed below, the appellate court’s ruling is interesting in a number of different respects.

The Third Circuit’s opinion in the case can be found here. The Wiley Rein law firm’s October 19, 2019 post about the decision on its Executive Summary Blog can be found here.
Continue Reading Third Circuit Finds Major Shareholder Exclusion Ambiguous

D&O insurance policyholders sometimes bridle when the insurers take steps to try to rein in burgeoning defense expense. In that situation, the D&O insurers will often try to remind the policyholder that because defense expense erodes the limit of liability, it is in everyone’s interest for defense expense to be monitored closely. An unusual coverage action in the Western District of New York reversed the usual concerns about insurer defense cost control. The policyholder sued its D&O insurer for breach of contract, bad faith, and intentional infliction of emotional distress not for failing to pay defense costs or full defense costs, but rather for allowing the policyholder’s defense expenses incurred in an underlying criminal action to exhaust the applicable limit of liability. While it is hardly a surprise that a court concluded that an insurer that paid out its full limits cannot be held liable for breach of contract – much less bad faith or infliction of emotional distress –there are still a number of interesting aspects to this dispute and to the court’s ruling.  
Continue Reading News Flash: Insurer That Paid Full Policy Limits Did not Breach the Policy or Act in Bad Faith

D&O insurance typically defines the term “Claim” to include criminal charges after indictment. However, the coverage available under the policy for criminal proceedings is excluded in the event of a final adjudication determining that precluded misconduct actually took place. But what happens to the coverage if there is no final adjudication but rather the criminal charges are resolved through a negotiation that results in a monetary payment by the criminal defendants? In a recent decision, the Eleventh Circuit determined that the applicable D&O insurance policy’s coverage did not extend to amounts paid in negotiated resolution of criminal charges, despite the absence of a final adjudication – not by operation of the exclusion, but because of the nature of the payments. 
Continue Reading 11th Circ.: Florida Public Policy Precludes Coverage for Voluntary Settlement of Criminal Charges

Dan Wolf

As I discussed in a recent post, in July 2019, a Delaware Superior Court judge held that an appraisal action is a Securities Claim within the meaning of the applicable D&O insurance policy. While this part of the court’s ruling was noteworthy, there was another part of the court’s ruling that was also important. In addition to the Securities Claim issue, the court also determined that policy provided coverage for pre-judgment interest on the fair value payment in the appraisal action, even though the policy did not provide coverage for the payment itself.

In the following guest post, Dan Wolf, an associate at the Gilbert law firm, takes a look at the pre-judgment interest aspect of the recent Delaware opinion. Among other things, Dan suggests that this aspect of the court’s decision changes defendants’ analysis of whether or not to prepay appraisal claimants. A version of this article first appeared on his firm’s blog, here. I would like to thank Dan for his willingness to allow me to publish his 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 Dan’s article.
Continue Reading Guest Post: Delaware Court Ruling Creates New Wrinkle for Defendants Evaluating Appraisal Claims

One way or the other, I have been doing D&O for more than 35 years. One of the reasons I love what I do is that there is always something new and so I am always learning. This week’s new thing is a recent ruling by a federal district court ruling that a debtor’s insurer could not rely on a bankruptcy exclusion in the debtor’s D&O policy to deny coverage for an underlying claim because the exclusion violates the bankruptcy code’s probation against ipso facto provisions in executory contracts. In all my years, I don’t believe I have ever run across the bankruptcy code’s ipso facto provision prohibition, so the district court’s ruling in this case was a learning opportunity for me – and I suspect it will be for most readers as well.
Continue Reading D&O Policy’s Bankruptcy Exclusion is a Prohibited Ipso Facto Provision and Unenforceable

In July, the Seventh Circuit issued a unanimous opinion in the case of Emmis Communications Corp. v. Illinois National Insurance Company, in which the court ruled that the policyholder’s provision of notice to the previous carrier precluded coverage for an underlying claim under the later of two D&O insurance policies. The court’s ruling was widely criticized (including also on this site). The policyholder, Emmis, filed a motion for panel rehearing or rehearing en banc. And then on August 21, 2019, the appeals court panel did something very unusual — the court withdrew its July opinion, in which it had reversed the district court, and substituted an order affirming the district court’s ruling. As discussed below, this odd and inexplicable sequence of events raises some serious questions. The Seventh Circuit panel’s August 21, 2019 order can be found here.   
Continue Reading In Odd Twist, Seventh Circuit Panel Reverses Itself on Prior Notice Ruling

In an interesting development in a long-running legal battle in which for-profit education company Apollo Education Group is seeking D&O insurance coverage for its $13.125 million settlement of an options backdating-related securities class action lawsuit, the Ninth Circuit has certified to the Arizona Supreme Court the question of the standard of law to be applied to the insurance policy’s consent to settlement provisions. The Arizona Court’s response to the certified question potentially could have important implications for the meaning and application of similar provisions in other D&O insurance policies. The Ninth Circuit’s August 15, 2019 opinion certifying the question to the Arizona court can be found here.
Continue Reading Ninth Circuit Certifies Consent to Settlement Question to Arizona Supreme Court