D & O Insurance

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An issue that frequently comes up when companies are in bankruptcy or in other forms of receivership is whether the companies’ D&O insurer can advance payment of individuals’ defense costs over the receiver’s objections. In a recent case, a Northern District of Texas judge has ruled that the individual defendants in an SEC enforcement action are entitled to have their defense expenses advanced notwithstanding the asset stay in the proceeding and despite the receiver’s objections. However the policy’s limits of liability are all but exhausted, which raises its own set of issues, as discussed below. Northern District of Texas Judge Sydney Fitzwater’s June 6, 2018 opinion in the case can be found here.
Continue Reading D&O Insurance: Company in Receivership, Insurer Can Advance Defense Expense, But Limits Exhausted?

A recurring issue under private company D&O insurance policies is the scope of the preclusive effect of the professional services exclusion. This question is particularly important for companies in professional services industries, as just about everything these kinds of companies do arises in some way out of their delivery professional services. In a June 4, 2018 decision in a case presenting these issues, the Ninth Circuit affirmed the district court’s holding that the professional services exclusion in an educational services company’s D&O insurance policy precluded coverage for a False Claims Act claim. As discussed below, the case raises questions about the purposes of the professional services exclusion and the way it operates to restrict available coverage. The Ninth Circuit’s June 4, 2018 opinion can be found here.
Continue Reading Ninth Circuit: Professional Services Exclusion Precludes D&O Insurance Coverage

One of the key elements to establish coverage under a directors and officers insurance policy is the existence of claim is for actions undertaken by an insured individual in an insured capacity – that is, in his or her capacity as a director or officer of the company. Things in life are never simple, and lawsuits often allege that corporate director or officer defendants were acting in multiple capacities – that is, both in their capacity as a director or officer and in other capacities as well. These multiple capacity claims often present policy interpretation and coverage issues under D&O insurance policies.

In a recent case, the District Court of North Dakota (applying North Dakota law) held that coverage under a D&O insurance policy does not apply to a claim alleging that the insured defendant was acting in multiple capacities. The court also held that the Insured vs. Insured exclusion precluded coverage where the claimants included both insured persons and individuals that were not insured persons. The decision raises some interesting policy language and policy interpretation issues. A copy of May 18, 2018 decision by District of Massachusetts Judge William G. Young, sitting by designation in the District of Nevada, can be found here.
Continue Reading D&O Insurance: Coverage Precluded for Insured Director Acting in Multiple Capacities

A frequently recurring claim that many companies face is a lawsuit brought by a competitor after the company hires the competitor’s former employee. Depending on how the competitor’s lawsuit is framed, these kinds of claims can be an awkward fit with the defendant company’s D&O insurance policy. A recent insurance coverage dispute in Delaware state court illustrates the kinds of coverage issues that can sometimes arise in connection with these claims. As discussed below, there are ways that D&O insurance policies can be revised to try to address at least some of the coverage issues. Delaware Superior Court Judge Eric Davis’s May 2, 2018 in the insurance coverage litigation can be found here.
Continue Reading D&O Insurance Coverage for Competitor Hire Claims

Trinitee Green

D&O insurance issues can be particularly difficult in the bankruptcy context. A number of issues can arise in the bankruptcy context that are not usually involved in ordinary claims circumstances. In the following guest post, Trinitee Green of the Bryan Cave Leighton Paisner law firm reviews and analyzes a particularly complicated set of circumstances that occurred post-confirmation in a bankruptcy proceeding. I would like to thank Trinitee for allowing me to publish her 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 Trinitee’s article.
Continue Reading Guest  Post: Plaintiffs Can Keep Their D&O Claims But They Cannot Touch The Insurance Proceeds

As I have frequently noted, a recurring and vexing D&O insurance issue is the question of relatedness between different claims. Another frequent D&O insurance coverage issue is the question of the applicability of a special event or prior litigation exclusion. A recent Southern District of Indiana decision, applying Indiana law, addressed both of these issues in the course of determining that a Special Event Exclusion in Emmis Communications Corp.’s D&O insurance policy did not preclude coverage for the defense costs the company incurred in defending a shareholder suit relating to the company’s preferred stock. The decision is very fact specific, but because of the range of issues involved, the opinion is interesting and it also underscores the critical importance of the precise wording used in exclusionary clauses. The March 21, 2018 opinion can be found here.
Continue Reading D&O Insurance: Special Event Exclusion Does Not Preclude Subsequent Litigation Coverage

In a January 23, 2018 unpublished decision (here), the Eleventh Circuit held that a D&O insurance policy’s prior acts exclusion does not preclude coverage where the subsequent claim against insured persons is “independent” from the alleged wrongful acts that occurred prior to the policy period. The appellate court’s opinion, in which it affirmed a district court’s ruling rejecting a D&O insurer’s argument that the exclusion precluded coverage for the FDIC’s claim against the former directors and officers of a failed bank, underscores the necessity for a link between the prior wrongful acts and the subsequent claim in order for the exclusion to preclude coverage for the claim. The Carlton Fields law firm’s February 26, 2018 memo about the decision can be found here.
Continue Reading Prior Acts Exclusion Does Not Preclude Coverage Where Subsequent Claim Independent from Alleged Prior Acts

In the following guest post, Syed Ahmad, Brittany Davidson, and Andrea DeField of Hunton & Williams LLP take a look at a very interesting New York trial court decision relating to D&O insurers’ duty to advance defense costs. I would like to thank the authors for their willingness to allow me to publish their article as a guest post on my site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ guest post.
Continue Reading Guest Post: Court Requires Insurers to Advance Insureds’ Defense Costs

A recurring D&O insurance issue is the question of whether or not coverage for a particular claim is precluded under the relevant policy’s professional services exclusion. A recent decision by the Second Circuit addressed questions concerning the applicability of a professional services exclusion in a D&O insurance coverage dispute arising out of the mistake-plagued Facebook IPO. In a January 22, 2018 opinion (here), the appellate court affirmed the district court’s ruling that coverage for the settlement of Facebook IPO investors’ claims against NASDAQ was precluded by the NASDAQ’s D&O insurance policy’s professional services exclusion. The opinion includes some interesting discussion of considerations relevant to the exclusion’s applicability.
Continue Reading Second Circuit: Professional Services Exclusion Precludes D&O Coverage for NASDAQ’s Facebook IPO Claims

Over the last few days, I have published several posts looking back at 2017. In addition to looking back, this is also the time of year for looking forward as well. Among other things to watch out for this year is a series of D&O insurance coverage cases that are now pending in the appellate courts. In a January 9, 2018 article (here, subscription required), Law 360 author Jeff Sistrunk identifies three of these cases to watch this year. As discussed below, these cases not only are worth watching but could have important ramifications as well.
Continue Reading Key D&O Insurance Coverage Appeals to Watch This Year