Claims under Professional Liability Insurance policies and Management Liability Insurance polices are often complex and notoriously expensive to defend. As a result, these policies are usually written on a “defense inside the limits” basis, meaning that the payment of defense expenses reduces the remaining limit of liability. Certain other lines of insurance, such as, for example, general commercial liability insurance, are often written on a “defense outside the limits” basis, meaning that the defense costs are paid by the insurer and do not erode the limit of liability.

In an interesting development, the Nevada legislature has passed, and the Nevada governor has approved, a Bill that prohibits insurers from issuing policies containing a provision that reduces the limit of liability by the costs of defense. I suspect that many in the liability insurance industry are unaware of this legislation prohibiting defense- inside-the-limits liability insurance. I also suspect that, for reasons discussed below, the new legislation will generate disruption in the professional liability and management liability insurance market in Nevada when it goes into effect on October 1, 2023.

After California’s legislature enacted legislation requiring greater diversity on corporations with corporate offices in California in 2020, the legislation was almost immediately the subject of a court challenge. Now, in a May 15, 2023, ruling, a California federal district court has held that the statute is facially unconstitutional under the Equal Protection Clause and in light of precedent of the U.S. Supreme Court. As discussed below, the court’s decision follows an earlier ruling by a California State court that previously struck down the statute. A copy of the court’s May 15, 2023, opinion can be found here.

In my post yesterday discussing the implications of Silicon Valley Bank’s failure, I discussed the likelihood that D&O claims could arise in the wake of the failure. It has not taken long for this possibility to materialize. In morning (west coast time) on Monday, March 13, 2023, a plaintiff shareholder filed a securities class action lawsuit against SVB’s parent holding company and two of its executives. As discussed below, this lawsuit is likely just the first of what undoubtedly will be many D&O lawsuits against the company and its executives. A copy of the new complaint can be found here.

In a development that has an all-too-familiar feel, on Friday March 10, 2023, banking regulators closed California-based Silicon Valley Bank (SVB), in what is the second-largest banking failure in U.S. history. The closure of the country’s 16^th largest bank has sent shivers through the financial sector, raising questions about other lending institutions. For those of us in the D&O insurance industry, the bank’s closure also raises unpleasant memories about past failed bank D&O claims. As discussed below, the sequence of events at SVB shows how rising interest rates represent a significant threat that could contribute to a combination of circumstances that might well lead to D&O claims. A copy of the FDIC’s March 10, 2023, press release announcing the bank’s closure and the agency’s appointment as the bank’s receiver can be found here.

In a development with interesting implications, the video gaming company Activision Blizzard has agreed to pay $35 million to settle an SEC enforcement action based on allegations that the company lacked controls and procedures to ensure that disclosures about the company’s workforce were adequate. The SEC’s allegations also pertained to alleged whistleblower violations at the company. The enforcement action, underscores the agency’s willingness to use its authority, as one law firm memo put it, to transform workplace misconduct allegations into securities law violations. The SEC’s February 3, 2023, Press Release about the settlement can be found here. The SEC’s Order relating to the allegations can be found here.

One of the perennial D&O insurance coverage issues is the question of whether or not 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 that was first made when the first of the claims was filed. This seemingly technical determination can have important implications because it controls whether only one or whether multiple insurance towers apply to the claims. A recent ruling in a coverage dispute in the Western District of Washington provides interesting insight into the kinds of problems relatedness disputes can present. It is also an interesting example of a case in which even though there undoubtedly were overlaps between two claims, the court ultimately determined that the claims were unrelated for D&O insurance coverage purposes. The court’s August 8, 2022 opinion in the case can be found here.
Continue Reading D&O Insurance: Two Claims Involving Pre-IPO Transactions Found Not Related

While it may or may not be true, as some have said, that “everything is securities fraud,” it certainly does seem to be the case that there is not an event or development that occurs that does not eventually draw a securities lawsuit. For that reason, I was pretty sure that eventually we would see securities litigation relating to the Russian invasion of Ukraine. Well, as it has turned out, at least one securities lawsuit has now been filed based on circumstances relating to the war in Ukraine. Late last week, a plaintiff shareholder filed a securities class action lawsuit against Credit Suisse Group based on allegations concerning the enforcement of economic sanctions imposed on Russian oligarchs in the wake of the Russian invasion. A copy of the plaintiff’s April 29, 2022 complaint can be found here.
Continue Reading First Ukrainian War-Related Securities Suit Filed

Readers will recall that at the peak of the #MeToo movement, several companies were hit with securities lawsuits and other types of D&O claims relating to underlying allegations of sexual misconduct or sexual harassment. Among these lawsuits was the #MeToo-related securities class action lawsuit filed against CBS. The CBS lawsuit was largely dismissed; however, one allegation survived the dismissal motion. Now, the parties to the CBS lawsuit have agreed to settle the case, as discussed below. The settlement is subject to court approval. The parties’ April 15, 2022 stipulation of settlement can be found here.
Continue Reading CBS Settles #Me-Too-Related Securities Class Action Lawsuit