Francis Kean

Earlier this month I published a guest post in which John McCarrick and Paul Schiavone suggested various policy terms and conditions they proposed should be revisited as D&O insurers seek profitability. My comments on their proposals appeared as an appendix to John and Paul’s article. John and Paul’s article has provoked a series of responses. Last week, I published a second guest post in which Paul Ferrillo provided his thoughts in response to John and Paul’s article. And in yet another guest post, Gil Isidro provided his comments as well. Now, as set out below, Francis Kean adds his voice to the dialog. Francis is Executive Director FINEX Willis Towers Watson. I would like to thank Francis for allowing me to publish his comments. Here is Francis’s article.
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Gil Isidro

As many readers will recall, earlier this month I published a guest post in which John McCarrick and Paul Schiavone provided a list of policy terms and conditions they suggested should be revisited as D&O insurers seek to reposition themselves toward profitability. I included my own comments to John and Paul’s article as an appendix to their guest post. Last week, I published a second guest post in which Paul Ferrillo provided his thoughts in response to John and Paul’s article. In the following guest post, Gil Isidro  adds his comments to the dialog. Gil Isidro is Lead Coverage Counsel with Woodruff Sawyer.  Before joining Woodruff last summer, Gil was an attorney with AIG Financial Lines for 14 years, the last few of which were spent overseeing legal support of its management liability division. I would like to thank Gil for allowing 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 Gil’s article.
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Under claims made insurance policies, policyholders must provide timely notice of claim to their insurers in order to trigger coverage. Late notice is among the most common reasons that insurers deny coverage for claims. In order to try to avoid a coverage denial for late notice, policyholders have tried to argue that late notice should not preclude coverage where the policyholder renewed the coverage and where successive policies with the same insurer are in place. In a recent decision, an Ohio appellate court, applying Ohio law, rejected a policyholder’s attempt to rely on this kind of continuity of coverage argument. The court’s decision raises some interesting issues, as discussed below.
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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.


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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.
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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.
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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.
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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.  
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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. 
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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.
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