Private company management liability insurance policies typically contain certain policy exclusions, including, for example, the Insured v. Insured Exclusion and the Contractual Liability Exclusion. These exclusions often include carve-backs preserving coverage for otherwise excluded claims. While the exclusions and even the carve-backs may be familiar, the way they operate in practice may not be as familiar, particularly the carve-backs. In a recent insurance coverage decision from the District of Massachusetts, applying Massachusetts law, the court considered how common coverage carve-backs operate and interact. Readers may find the way the carve-backs did or did not apply to provide some interesting lessons. A copy of the Court’s November 9, 2023, opinion can be found here.

Continue Reading Carve Backs Preserve Coverage for Otherwise Excluded Claims

In a move that may set a record for hacking chutzpah, a cyber ransom gang has filed a complaint with the SEC reporting that a company they hacked had failed to report the incident to the SEC within the time required by the agency’s new cybersecurity disclosure guidelines. The gang apparently filed the complaint after the hacked company failed to respond to the hackers’ ransom demand. The hacking incident and the SEC report were first reported in a November 15, 2023, post on the DataBreaches.net site, and further detailed in a November 15, 2023, post on the BleepingComputer.com site.

Continue Reading Hackers Complain to SEC Company They Hacked Failed to Disclose the Incident
Frank Hülsberg
Burkhard Fassbach

In the following guest post, Burkhard Fassbach and Frank Hülsberg take a look at alternative litigation risk insurance products. These products allow insurance buyers to manage risks arising from known litigation. Frank is a Chartered Accountant and Tax Advisor in Dusseldorf, Partner and Member of the Executive Board at ADKL AG Wirtschaftsprüfungsgesellschaft in Germany and Burkhard is a D&O lawyer in private practice in Germany. I would like to thank Burkhard and Frank for allowing me to publish their article 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 Burkhard and Frank’s article.

Continue Reading Guest Post: Eye on Litigation Risk Insurance

The SEC has been an active cop on the beat, as reflected in its recently released Enforcement Division statistics for the 2023 fiscal year, ended September 30, 2023. Both the total number of SEC enforcement actions and the number of “standalone” enforcement actions rose in FY 2023 compared to the prior year. The agency also filed the most enforcement actions against public companies since FY 2019. In addition, the SEC obtained the second highest annual amount of financial remedies in SEC history.

Continue Reading SEC Stats Show the Agency is an Active Enforcement Cop

According to Renaissance Capital (here), in the heady days during the two-year period 2020 and 2021, 618 traditional U.S. IPOs were completed, raising over $220 billion. (These stats do not include SPAC IPOs). By contrast, in the period 2022-2023 YTD, there have only been 171 traditional U.S. IPOs completed, raising just $27 billion. While many market observers yearn for a return of the buoyant IPO market that prevailed two years ago, signs are that it could be a while before the IPO market takes off again. As detailed in a November 14, 2023, Wall Street Journal article about the state of the IPO market, and as discussed below, there are a host of concerns weighing on the IPO market.

Continue Reading It Could be a While Before a Buoyant IPO Market Returns
Priya Cherian Huskins

In a recent post in which I discussed the cyber incident-related enforcement action the SEC brought against the software company SolarWinds, I noted that the defendants named in the action included the company’s Chief Information Security Officer(CISO), adding that the SEC’s naming of the CISO as an enforcement action defendants “is sure to send a shiver down the collective spines of the CISO community.” In the following guest post, Priya Cherian Huskins, Senior Vice President and Partner, Woodruff Sawyer, takes a detailed look at the agency’s action against the SolarWinds CISO, and considers the key liability and insurance implications. A version of this article previously published on Woodruff Sawyer’s D&O Notebook here. I would like to thank Priya 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 Priya’s article.

Continue Reading Guest Post: CISO Liability in Focus: SEC Enforcement, Insurance, and [Personal] Risk Mitigation

One factor that contributed significantly to the total number of securities class action lawsuits filed in 2021 and 2022 was the proliferation of SPAC-related securities suit filings. Although diminished in number this year relative to the two prior years, and while the filing pace has declined as the year has progressed, SPAC-related securities suits continue to be filed in 2023. In the latest example of this continuing trend, last week a plaintiff shareholder filed a securities suit against the executives and sponsor of a SPAC that merged with a health monitoring technology company that later went bankrupt. The named defendants include officers of the bankrupt company. While the suit is interesting as an example of the continuing threat of SPAC-related litigation, it may be even more important as an illustration of the way that geopolitical risk increasingly can translate into securities litigation.

Continue Reading SPAC-Related Suit Shows How Geopolitical Risk Can Translate into Securities Litigation

Policyholders and their representatives have long pushed to have the definition of “claim” in professional and management liability insurance policies expanded, to bring an increasingly larger kinds of circumstances within the policies’ coverage. However, there are consequences when more kinds of circumstances constitute a “claim,” such as, for example, with respect to the claims-made date and notice obligations. A recent insurance coverage ruling by a New York state court interpreting a lawyers’ professional liability insurance policy underscores how an expanded definition of the term “claim” — in this case, pertaining to a request to toll the statute – can affect the availability of coverage. The court, applying New York law, determined that a tolling request prior to the policy period met the applicable policy’s definition of claim, and therefore, because the claim was first made before the policy incepted, the subsequent claim during the policy period was not covered.

Continue Reading Tolling Agreement Prior to the Policy Period Precludes Coverage for Later Claim

The drama surrounding former crypto mogul Samuel Bankman-Fried’s criminal prosecution and conviction has dominated the business pages for weeks. In addition, and as the news reports noted at the time, just before the criminal trial began, SBF sued one of FTX’s excess D&O insurers, alleging the insurer was refusing to pay his legal bills. Earlier this week, it emerged that SBF has withdrawn his insurance coverage lawsuit. But while the coverage lawsuit apparently now will not go forward, the interesting questions the situation presented are still worth asking. And the short-lived coverage litigation also unearthed some interesting stuff, as discussed below. Daphne Zhang’s November 7, 2023, Bloomberg article about the coverage litigation, which contains a comprehensive overview of the coverage dispute, can be found here.

Continue Reading FTX Legal Drama Includes D&O Coverage Fight (Now Withdrawn, but Not Forgotten)

Earlier this year, three of the largest banks failed in a sequence of events that was dubbed the Banking Crisis of 2023. With the passage of time, fears that the three failures could foreshadow further failures and deeper woes seemingly subsided, though a wave of banking institution downgrades in August 2023 briefly rekindled concerns. More recently, things have been quiet. Does that mean it is time to sound the all-clear signal? Perhaps, but there are signs out there suggesting continued vigilance may be in order.

Continue Reading Checking in on the 2023 Banking Crisis