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In a recent decision in an insurance coverage dispute, the Delaware Superior Court granted the insurers’ motions to dismiss, holding that coverage under two towers of insurance was precluded, respectively, by the No Action clause and the Past Acts Exclusion. Insurance coverage practitioners and observers will find this decision interesting in and of itself, for what it says about the relevant policy provisions, and as a general matter, as an example of a Delaware court coverage decision. As discussed below, the decision arguably is an expectations-defying example of an insurer-friendly Delaware court coverage decision. A copy of the court’s May 9, 2024 decision opinion can be found here.Continue Reading Del. Court Dismisses Coverage Suit Based on No Action, Prior Acts Clauses

Financially distressed companies often can only obtain D&O insurance coverage on a policy with a bankruptcy or insolvency exclusion precluding coverage for bankruptcy-related claims. The enforcement of these exclusions in the wake of a subsequent bankruptcy can produce harsh results, and insureds often argue that the exclusion does not apply or even that the exclusion…

It is frequently the case that lawsuits are preceded by a letter in which a prospective litigant identifies a grievance and makes various kinds of threats or demands. A perennial question is whether this type of pre-suit demand letter constitutes a “claim” within the meaning of a claims-made liability insurance policy. The Second Circuit, applying New York law, recently affirmed a district court ruling holding that a pre-suit demand letter, received before the applicable policy’s coverage inception date, was a claim within the meaning of the policy. Because the claim was first made prior to the inception of coverage, the court held that there was no coverage for the subsequently filed lawsuit. The Court’s ruling provides an interesting take on this frequently recurring issue.Continue Reading When Is a Pre-Suit Demand Letter a Claim?

In an interesting March 18, 2024, decision, a California federal district court, applying California law, has held that insurance coverage may be available under the D&O liability endorsement to a community association policy for a claim arising from funds misdirected due to fraudulent payment instructions in a spoofed email. The court held that because the non-payment happened due to the association’s treasurer’s alleged negligence, the vendor’s claim for non-payment arose out of “wrongful acts” of the treasurer, and therefore the vendor’s claim triggered coverage. The court’s decision raises some interesting possibilities about the potential for D&O insurance coverage for these kinds of misdirected payment claims, and it also raises interesting possibilities about potential coverage for breach of contract claims.Continue Reading Claim for Nonpayment Due to Payment Instruction Fraud Potentially Covered Under D&O Policy

D&O insurance policies typically extend coverage to “duly elected or appointed” directors and officers. But what happens if the proper election or appointment procedures were not followed yet the individual served as a director anyway? Is that person a “director” for purposes of D&O insurance coverage? How about for purposes of the Insured vs. Insured exclusion? These are the questions that a federal district court, applying Idaho law, addressed in a case involving individuals whose board appointments were procedurally flawed but whose board membership was subsequently ratified by corporate conduct. The court concluded the individuals are “directors” within the meaning of the policy, and so lawsuits brought by the individuals against the company and other board members represent insured vs. insured claims for which coverage is precluded by exclusion. A copy of the court’s March 15, 2024, decision can be found here. (Hat Tip to Paul Curley of the Kaufman, Borgeest, & Ryan law firm for his March 16, 2024 LinkedIn post about the case, here.)Continue Reading Is a Director “Duly Elected or Appointed” If the Election Was Flawed But Later Ratified?

On March 6, 2024, in a decision that has attracted a lot of attention in the business press, the Eastern District of Virginia, applying Virginia law, held that the bump-up exclusion in Towers Watson’s D&O insurance policy precludes coverage for the $90 million paid in settlement of claims relating to the firm’s January 2016 merger with Willis Group Holdings. As discussed below, the court’s ruling highlights recurring issues concerning the wording of the bump-up exclusion. A copy of the March 6, 2024, opinion can be found here.Continue Reading Bump-Up Exclusion Precludes Coverage for Merger-Related Claims Settlement

One of the perennial D&O insurance coverage issues is the question of whether two or more claims are or are not interrelated. Under the operation of provisions typically found in most D&O insurance policies, if two or more claims are interrelated within the meaning of the policy, they are deemed to be a single claim first made when the first of the claims was filed. This seemingly technical determination can have important implications for the determination of which of the two potentially related insurance programs applies to a claim.

These recurring issues arose in connection with a dispute over which of two potentially applicable D&O insurance programs apply to the securities class action lawsuit filed against Alexion Pharmaceuticals. Insurers in the different towers argued over whether an earlier SEC subpoena, issued to Alexion during an earlier policy period, was related to the later securities suit, which was filed during a later period. In an interesting February 15, 2024, opinion (here), Delaware Superior Court Judge Paul R. Wallace, applying Delaware law, held that, despite some overlap, the subpoena and the securities suit were not related.Continue Reading Prior SEC Subpoena and Later Securities Suit Held Not to Be Related

A frequently recurring insurance claims handling challenge is the problem of “too many insureds, not enough insurance.” Different insureds can have competing and even incompatible interest in the limited insurance funds. As a recent insurance coverage dispute in the Southern District of New York showed, these problems are magnified when the competing insureds also have conflicting interests in the underlying claim. Judge Jennifer Rochon’s February 8, 2024, opinion rejecting one insured’s attempt to block the competing demands to the insurance proceeds of another insured can be found here. Paul Curley’s February 11, 2024 LinkedIn post about the decision can be found here.Continue Reading One Insured Can’t Block Insurance for Another Insured’s Settlement Based on Consent Clause

If the underlying insurers have paid their limits, you would generally expect that the next-in-line excess insurer would also have to pay its limit as well for losses within its layer. However, in an appellate decision with what is arguably an unexpected twist, an appellate court has held – in reliance on express policy language – that an upper layer excess carrier is relieved of its obligation to pay because the underlying carriers, all of whom paid their full limit, did not admit liability. The Third Circuit’s January 19, 2024, decision, marked “not precedential,” can be found here. A January 21, 2024, LinkedIn post about the decision by Paul Curley of the Kaufman, Borgeest & Ryan law firm can be found here.Continue Reading Excess D&O Insurance Coverage Barred Because Underlying Insurers Didn’t Admit Liability

Nelson Kefauver

In the following guest post, Nelson Kefauver, Head of Profin Underwriting at Intact Insurance, takes a look at how three frequent industry predictions from the recent past have turned out.  Nelson’s comments are specific to the private and non-profit D&O insurance space and not do not refer to the public company D&O insurance…