D & O Insurance

Subscribe to D & O Insurance via RSS
Gillon_Peter_16988_bio
Peter M. Gillon
Alex Hardiman - Counsel - Litigation
Alexander Hardiman

One of the most distinctive corporate and securities litigation phenomena over the last several years has been the rise in merger objection lawsuits. We are now to the point that virtually every M&A transaction attracts at least one lawsuit. These suits present a number of challenges, including, among other things, questions arising in connection with D&O insurance coverage for the companies and individuals named as defendants in the lawsuits, particularly with respect to the price change exclusion, sometimes referred to as the “bump up” exclusion.

In the following guest post, Peter M. Gillon and Alexander Hardiman of the Pillsbury Winthrop Shaw Pittman LLP law firm take a look at the insurance coverage issues that frequently arise in these types of cases and offer some practical advice about the ways that insureds can maximize their insurance coverage when these claims arise, particularly in dealing with issues involving the bump up exclusion. Peter is a Partner and Alex is Counsel at the Pillsbury law firm. A version of this article was recently published as a Pillsbury client alert.

I would like to thank Peter and Alex for their willingness 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 blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Peter and Alex’s guest post.

********************************************

With the explosion of “merger objection” lawsuits being filed by the plaintiffs’ securities bar in the last decade, policyholders seeking coverage under their directors’ and officers’ (D&O) liability insurance for those suits have increasingly been bumping heads with their insurance carriers over the application of the “price change exclusion” (also referred to as the “bump-up” exclusion).  This has been a major source of frustration for companies reasonably expecting their policies to respond fully to merger objection suits – especially shareholder suits claiming breach of fiduciary duties by the target company’s Board of Directors in approving the sale of the target.  Many companies and their securities defense counsel have capitulated in the face of their carriers’ declinations of coverage.  But, as this note explains, it is critical to consult with coverage counsel on these matters as insurers’ assertion of the price change exclusion is often misplaced. 
Continue Reading Guest Post: Maximizing the Return on Your D&O Insurance for Merger Objection Lawsuit

GaIn  a recent post in which I discussed the “basic value proposition” of D&O insurance, I noted that among the five indispensable elements required in order for coverage under a D&O insurance policy to exist is the requirement that a Claim for an alleged Wrongful Act against an Insured Person acting in an Insured Capacity. The prerequisite that the Insured Person must have been acting in an Insured Capacity at the time of the alleged Wrongful Act arises from the fact that individuals act in a number of different capacities; it is only conduct undertaken in their capacity as an officer or director of the insured company for which the insurance policy provides coverage.

A June 22, 2015 decision by the Eleventh Circuit, applying Georgia law, provides a good illustration of how an individual might be acting in multiple capacities, and underscores the fact that the insurance under a D&O policy is only available when the insured was acting in his or her capacity as a director or officer of the insured company. The case presents some interesting policy wording lessons. A copy of the Eleventh Circuit’s opinion can be found here.
Continue Reading D&O Insurance: A Question of “Capacity”

nystateOne of the standard features of D&O insurance policy is the fraud exclusion, which these days typically provides that the exclusion is triggered only after a “final” judicial determination that the precluded conduct has occurred. But what is it that makes a determination “final”?

On June 23, 2015, in a decision that has a number of important implications, the New York (New York County) Supreme Court, Appellate Division, First Department, applying New York law, held that the imposition of a post-conviction criminal sentencing constitutes a “final judgment” that not only triggered the fraud exclusion in a D&O insurance policy but also required the convicted individual to reimburse the carrier for amounts it had already paid – even though the individual’s appeal of his criminal conviction was pending.

As discussed below, the court’s opinion has some important lessons for D&O insurance practitioners. A copy of the court’s opinion can be found here.
Continue Reading D&O Insurance: A “Final” Analysis

third circuitThe traditional Insured vs. Insured exclusion found in many D&O insurance policies is a frequent source of claims disputes, particularly in the bankruptcy context. As its name suggests, the Insured vs. Insured exclusion precludes coverage for claims brought by one Insured against another Insured. The typical Insured vs. Insured exclusion includes a provision (often…

floridaIn a coverage dispute arising out of the long-running Rothstein Ponzi scheme scandal, a Southern District of Florida judge, applying Florida law, has held that the professional services exclusion in the Rothstein bank’s D&O insurance policy precluded coverage for claims brought against the bank and certain of its directors and officers by the Rothstein…

aus3An exclusion sometimes found in D&O insurance policies precludes coverage for claims made by shareholders who have a specified percentage of ownership in the insured company. This type of exclusion is called a Major Shareholder Exclusion (or, sometimes, the Principal Shareholder Exclusion). An interesting May 6, 2015 decision (here) by the Supreme Court…

insurancefilesIn many cases, companies’ D&O insurance programs are structured in several layers, with one or more policies of excess of insurance written over top of a primary layer. The excess insurance is often said to be written on a “follow form” basis, meaning that the primary policy’s terms govern the operation of the excess policies.…

insurancepolicyI make it my business on this blog to try to write about the latest developments and current trends in the world of D&O, but I think that every now and then it is a good idea to step back and take a look at the bigger picture. For example, let’s consider the standard D&O…