In a unpublished August 30, 2017 opinion (here), the Ninth Circuit affirmed a district court ruling that a trial court verdict that a hospital system had violated the antitrust laws was not an adjudication sufficient to trigger the improper profit exclusion in the hospital system’s D&O insurance policy, and therefore that the hospital system was entitled to reimbursement of its expenses incurred in defending the antitrust suit. The decision provides a useful illustration of the way that the final adjudication provisions found in the conduct exclusions of most current D&O insurance policy operates. The Wiley Rein law firm’s Executive Summary Blog’s September 5, 2017 post discussing the Ninth Circuit opinion can be found here.
Continue Reading D&O Insurance: Antitrust Verdict Does Not Trigger Policy’s Improper Profit Exclusion
Ninth Circuit Affirms That Invasion of Privacy Exclusion Precludes D&O Insurance Coverage for TCPA Claim
As litigation under the Telephone Consumer Protection Act (TCPA) has proliferated in recent years, one of the recurring questions has been whether the defendants have insurance coverage for these kinds of claims. The insurance questions have in turn generated insurance coverage litigation, primarily with respect to the defendants’ CGL insurance policies, but also with respect to their D&O insurance policies as well. One closely watched recent case involved a D&O insurance dispute arising out of a TCPA claim against the Los Angeles Lakers. The district court had held that the Lakers’ D&O insurance policy did not cover the TCPA claim and the Lakers’ appealed. On August 23, 2017, in a decision that is sure to attract both attention and perhaps further skirmishing on these issues, a divided Ninth Circuit panel affirmed the district court’s holding, concluding that the invasion of privacy exclusion in the Lakers’ D&O insurance policy precluded coverage for the claim. The Ninth Circuit’s opinion can be found here.
Continue Reading Ninth Circuit Affirms That Invasion of Privacy Exclusion Precludes D&O Insurance Coverage for TCPA Claim
D&O Insurance and Delaware Appraisal Rights Proceedings
Much has been written about the explosive growth in merger objection litigation in recent years. A less common but increasingly frequent type of merger-related litigation is appraisal rights litigation. In these types of lawsuits an investor exercises his or her statutory right for a judicial determination of the value of his or her stock. These kinds of cases present their own sets of issues and challenges.
Among the recurring issues is the question of whether or not the costs a company incurs in an appraisal proceeding are covered under a D&O insurance policy; traditionally, D&O carriers have argued that appraisal proceedings are not covered under their policies because the request for an appraisal proceeding does not involve an alleged “Wrongful Act.” However, an August 2, 2017 memo by Peter Gillon and Benjamin Tievsky of the Pillsbury law firm (here) argues that in many cases this coverage analysis is inaccurate and that in fact there should be coverage under the D&O policy for the expenses incurred in an appraisal proceeding.
Continue Reading D&O Insurance and Delaware Appraisal Rights Proceedings
The Importance of D&O Insurance for Private Companies
Those of us immersed in the world of directors and officers could not imagine becoming involved in any sort of business organization without the protection and benefit of D&O insurance. Just the same, I have fairly regular conversations with officials and executives at closely held companies who see no need for the insurance, on their belief that without outside investors, their company faces no risk of incurring a D&O claim. However, long experience tells me that D&O insurance should be a part of every organization’s insurance program, regardless of its ownership.
Continue Reading The Importance of D&O Insurance for Private Companies
D&O Insurance: Securing Coverage for Books and Records Requests
The right of shareholders to demand inspection of companies’ books and records is of course nothing new. What is new is the increased frequency of books and records demands, often as a result of courts’ requirement for prospective shareholder claimants to investigate alleged misconduct of corporate executives before filing a lawsuit. The scope of the books and records requests is also expanding as well. These developments raise a number of D&O insurance coverage issues, which in turn has led to the rise of a variety of policy wording alternatives, as discussed in a recent paper.
Continue Reading D&O Insurance: Securing Coverage for Books and Records Requests
Professional Services Exclusion Precludes Coverage for All Insureds, Not Just Those Performing Services
If a D&O insurance policy exclusion precludes coverage for loss arising out of the performance of professional services, does the exclusion preclude coverage for all insureds or just the insureds who performed the services? In a July 5, 2017 opinion (here), the Eleventh Circuit, applying Florida law in a case related to the Rothstein law firm Ponzi scheme scandal, held that a bank’s D&O insurance policy’s professional services exclusion’s preclusive effect applied jointly and therefore precluded coverage for all insureds, not just for the individuals delivering the services. The decision raises some interesting issues, as discussed below.
Continue Reading Professional Services Exclusion Precludes Coverage for All Insureds, Not Just Those Performing Services
Guest Post: The D&O Cramdown: Triggering Side A DIC Coverage When an Underlying D&O Carrier Declines Coverage
In the following guest post, Peter Gillon and Eric Gold of the Pillsbury Winthrop Shaw Pittman law firm take a look at one of important drop down features of Side A DIC insurance coverage, the coverage that is triggered when an underlying carrier denies coverage. I would like to thank Peter and Eric for their willingness to allow me to publish their article as a guest post on this 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 Peter and Eric’s guest post.
Continue Reading Guest Post: The D&O Cramdown: Triggering Side A DIC Coverage When an Underlying D&O Carrier Declines Coverage
Purported Notice of Potential Claim Held Insufficient to Provide Notice of Actual Claim
In an interesting June 23, 2017 opinion in a case raising a host of claims made date, notice of potential claims, and notice of claims issues, Western District of Tennessee Judge Sheryl Lipman, applying Tennessee law, held that a purported notice to insurers of a potential claim was insufficient to provide notice of an actual claim, therefore concluding that the defendant insurers did not have to reimburse the policyholder for its $212.5 million FHA loan violation settlement with the DOJ. The opinion provides interesting insights into the meaning of the policy term “Claim,” as well as into what is required in order to provide sufficient notice of claim.
Continue Reading Purported Notice of Potential Claim Held Insufficient to Provide Notice of Actual Claim
Though Fraudulent Transfers Took Place During the Policy Period, Past Acts Exclusion Still Precludes Coverage
A prior acts exclusion in a bank holding company’s D&O insurance policy precludes coverage for claims based on allegedly fraudulent transfers made to a banking subsidiary during the policy period, because the transfers arose out of wrongful acts that occurred prior to the policy’s past acts date, according to a recent decision by the Eleventh Circuit, applying Florida law. The appellate court reasoned that, though the transfers occurred during the policy period, what made the transfers fraudulent was the company’s insolvency, which arose from officer misconduct that took place prior to the policy’s past acts date. The case provides an interesting example to consider past acts coverage in claims made policies.
Continue Reading Though Fraudulent Transfers Took Place During the Policy Period, Past Acts Exclusion Still Precludes Coverage
Eighth Circuit: Notice Provided During the Policy Period But After Seven Month Delay Not “As Soon as Practicable”
If an insured give notice of claim to its insurer during the policy period but seven months after a lawsuit is filed, has it provided notice “as soon as practicable” as required under the policy? Not according to a May 25, 2017 decision by the Eighth Circuit. The appellate court, applying Minnesota law, affirmed the district court’s holding that the provision of notice during the policy period but seven months after the lawsuit was filed against the insured did not satisfy the policy’s “as soon as practicable” notice requirement. While the Eighth Circuit’s ruling is consistent with the rulings of other courts on this issue, I still have concerns, as noted below. The Eighth Circuit’s opinion in the case can be found here.
Continue Reading Eighth Circuit: Notice Provided During the Policy Period But After Seven Month Delay Not “As Soon as Practicable”